(This episode was re-recorded for better sound quality)

The war in Ukraine, the rise of China, economic stagnation, and deteriorating relations with Africa are some of Europe’s most pressing geopolitical challenges.

In this episode, I talk about how banks reflect these geopolitical shifts.

Until the 2022 invasion of Ukraine, EU politicians and bankers treated Russia like any other Central and Eastern European country. Banks like UniCredit, Raiffeisen Bank International, Société Générale and others had significant subsidiaries in Russia, just as they had in e.g. the Czech Republic, Poland or Bulgaria.

Vice versa, Russian banks did business in Europe.

However, since the invasion, all but one Russian bank in the EU have been forced to shut down. In contrast, European banks continue to operate in Russia, to the chagrin of European and American officials.

As the visit of Xi Jinping to Hungary and Serbia demonstrates, good political relations and Chinese investment go hand in hand. Usually, the larger a country’s GDP, the more foreign banks it attracts. But although Hungary has a small economy, it has more Chinese banks than e.g. Austria, Sweden or Romania.

Macron talked about the need for cross-border consolidation of European banks. It’s easy to suspect ulterior motives, as BNP Paribas and Crédit Agricole are well placed to buy foreign competitors. But given the single European market, the dominance of local banks in the biggest euro countries doesn’t seem right.

Finally, as France’s military and political power in Africa wanes, French banks have been selling their African subsidiaries to local banks.

Future episodes will be about how to sell SocGen, the effect of higher interest rates, and the frozen Russian central bank assets at Euroclear.

Transcript at https://blog.janmusschoot.be/2024/06/10/putin-xi-macron-how-geopolitics-shapes-banking/