Geopolitical Sanctions, State Ownership, and Bank Stability in Europe: Evidence from EBA Disclosures and EU Sanctions Episodes

This paper investigates whether EU sanctions on Russia following February 2022 affected European banks' stability and how shock transmission changed with state ownership. The analysis is based on the European Banking Authority Risk Dashboard data for 2017Q4-2025Q2 and exposures to Russia, Ukraine and Belarus reported by the EBA.Strong aggregate resilience is identified, relying on European Banking Authority Risk Dashboard data for 2017Q4-2025Q2 and EBA disclosures on exposures to Russia, Ukraine and Belarus. The mean Common Equity Tier 1 ratio was 15.02% prior to 2022 and 15.88% following, and the mean non-performing loan ratio was 2.90% before 2022 and 1.85% after 2022. Return on equity increased from 5.52% to 10.10%, but this is probably as a result of repricing the money supply rather than as a result of sanctions. The loans and advances had the highest share of disclosed regional exposure, accounting for more than 80% of this exposure at 2021Q4, whereas loans and advances from Russian and Ukrainian counterparties amounted to around EUR 82 billion. The results show that there was no aggregate capital or asset-quality shock within the EU/EEA banks at the start. Ownership effects cannot be distinguished using sector averages, however. The paper thus suggests a bank and quarter fixed-effects event study interaction of pre-invasion Russia exposure, majority public ownership and post sanctions time period. It is not yet known whether state ownership reduced or exacerbated the shock, and this will be an empirical question to be answered at the bank level.