Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/311211 
Year of Publication: 
2025
Series/Report no.: 
BOFIT Policy Brief No. 1/2025
Publisher: 
Bank of Finland, Bank of Finland Institute for Emerging Economies (BOFIT), Helsinki
Abstract: 
This paper examines the current dependencies and exposures of the euro area's financial sector in a context of rising geopolitical tensions. Focusing on Russia, China, and the Middle East, we analyze direct exposures through lending and securities holdings of banks and large investors. Our findings suggest that the already modest exposures of the euro area have decreased in recent years. Notably, euro area banks and investors have significantly reduced their exposure to Russia in the wake of the Ukraine invasion, and China in response to regulatory uncertainty. Euro area banks reacted quickly to heightened geopolitical risk in the Middle East by reducing their exposure to countries affected by recent turmoil. A new set of potential risks have emerged, however, as a result of strengthened financial ties with the United States.
Subjects: 
Geopolitical tensions
financial exposure
banking sector
China
Russia
Middle East
Persistent Identifier of the first edition: 
Document Type: 
Research Report

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