Economy

British rail travellers were threatened with a summer of potential travel disruption after the RMT transport union announced it would ballot its members over a nationwide strike in a dispute over jobs and pay.The RMT said on Wednesday that more than 40,000 workers at infrastructure operator Network Rail and 15 train operating companies would be asked to vote in favour of industrial action. If approved it would be “potentially the biggest rail strike in modern history”, the union said.The dispute centres on plans by Network Rail to cut at least 2,500 “safety-critical” maintenance jobs, according to the RMT. Moreover, staff at train operating companies have faced pay freezes, threats to jobs and “attacks on their terms on conditions”, the union added.Its announcement of the ballot, which will be held from April 26 to May 24, comes against a backdrop of growing industrial unrest, as inflation erodes workers’ pay at a time when many employers are struggling to fill vacancies.Network Rail has warned of the need to cut costs but has yet to table any formal proposals. The infrastructure operator said it was “disappointed” by the RMT’s decision and urged the union to “work with us . . . as we build an affordable railway”. “Even as passenger numbers start to recover, we know travel habits and passenger demand have changed and the industry has to change too,” said Tim Shoveller, Network Rail’s regional director. He added that the infrastructure operator would not consider any changes that compromised safety.Staff shortages and labour disputes have also hit other parts of the transport sector.UK airlines cancelled scores of flights over the Easter holidays, blaming unprecedented levels of staff sickness. Unions claimed management had been too hasty in slashing workforces during the pandemic.Meanwhile, long queues of lorries built up at the port of Dover earlier this month — partly due to the cancellation of sailings by P&O Ferries, after it dismissed its entire UK crew and replaced them with agency workers. Railway workers are in a particularly difficult position, however, as the sector is under acute pressure to adapt to a long-term, post-pandemic decline in commuting and business travel.The railway industry faces an annual budget shortfall of £2bn as state support tapers while passenger numbers remain depressed.The government took over effective control of the railway network in 2020 and has spent around £15bn keeping services running, but has now ordered private train operating companies to identify savings. Some industry executives have privately said staffing is one of the few areas where they see significant scope to cut costs.

The Rail Delivery Group, the main trade body that represents Network Rail and the train operators, said the industry needed to “adapt” and could not take “more than its fair share from taxpayers”. It added the RMT’s strike action was “premature” and would put the recovery at risk.The Department for Transport said it wanted “a fair deal for staff, passengers and taxpayers” as the railway moved “off taxpayer life-support”.Under UK law, a strike is lawful only if a ballot attracts a majority “yes” vote, on a turnout of at least 50 per cent of those eligible to vote. For important public services, there is an additional threshold, that 40 per cent of all eligible union members must support the action. Although union insiders think a majority will support the ballot, it is not clear whether turnout will be high enough at all the bargaining units involved for strike action to take place at the national level. More

Good evening,The IMF’s Fiscal Monitor is the final in a flurry of reports from both the fund and the World Bank highlighting the fragile state of the global economy as it struggles with the lingering effects of the pandemic and the shock of war in Ukraine.Today’s instalment points out the “narrowing fiscal space” faced by governments and the likelihood that any short-term benefit to public finances from higher inflation will soon disappear under the pressure of higher food and energy prices alongside rising interest rates.The IMF now expects global prices to rise 7.4 per cent this year, much higher than the 3.2 per cent it forecast in late 2020. In its World Economic Outlook published yesterday, the fund cut its global growth forecast for this year to 3.6 per cent, down 0.8 points since its January projections and a sharp fall from its estimated total for 2021 of 6.1 per cent.Risks had “worsened significantly” from the war in Ukraine, it said, putting paid to the idea that this year would see a stronger recovery from the pandemic. On Monday, the World Bank also cut its global growth forecast from 4.1 per cent to 3.2 per cent.A potential embargo on Russian oil and gas would raise inflation even further, the IMF said.The effects of increasing price pressures, falling output and shrinking confidence across the global economy were also highlighted by the Brookings-FT tracking index, which compares global and country information with historical averages to determine whether data in a specific period is better or worse than normal. The index shows a marked slowing of growth since late 2021, with confidence levels dropping and a recent dip in financial market performance, leaving policymakers with “grim quandaries”.IMF chief Kristalina Georgieva told the Financial Times last week that the Ukraine war was a “massive setback” for the world economy. But as well as causing “catastrophic” losses in Ukraine and a severe contraction in Russia, there were also wider risks from a more fragmented global economy, she argued.“In a world where war in Europe creates hunger in Africa; where a pandemic can circle the globe in days and reverberate for years; where emissions anywhere mean rising sea levels everywhere — the threat to our collective prosperity from a breakdown in global co-operation cannot be overstated,” she said.Latest newsUkraine needs $5bn a month to plug financing gap, says IMFRio Tinto’s flagship iron ore mines report weak start to yearBundesbank president warns against hasty interest rate rises from ECB (Reuters)For up-to-the-minute news updates, visit our live blogNeed to know: the economyRussia is planning legal action to recover $300bn of its foreign currency reserves — nearly half its total holdings — frozen through western sanctions. The tactic has prevented Russia’s central bank supporting the falling rouble and forced it to impose capital controls.The energy crisis continues. Our Big Read tackles the crucial question: Can the EU wean itself off Russian gas? Despite Germany’s reliance on Russian supplies, it is resisting calls to restart nuclear power, as our new explainer details. US natural gas prices meanwhile have hit a 13-year high. Latest for the UK and EuropeYesterday’s IMF report also forecast that the UK would have the slowest growth in the G7 next year, increasing by just 1.2 per cent, and that the country’s inflation would be higher than other member states and slower to return to its 2 per cent target. The FT editorial board said the British government needed to recognise the continuing cost burden of coronavirus on healthcare, business and schools.Energy bosses told a parliamentary committee that Britons were facing a “truly horrific” autumn, as steep rises in bills potentially leave up to 40 per cent of the country in fuel poverty. Households are already dealing with a 54 per cent rise in annual costs since the start of this month but could be paying an additional £600 from October when the price cap moves up another notch.German producer prices increased by an annual 30.9 per cent in March — the fastest rate since 1949. The rise was driven by surging energy prices and higher costs of products such as fertiliser, of which Russia is a large exporter. The IMF downgraded its growth forecast for Germany this year by 1.7 percentage points to 2.7 per cent.Global latestSeveral big banks have downgraded growth forecasts for China as the country sticks to its rigorous zero-Covid policy, most notable in the strict lockdown of Shanghai, where many of the city’s wealthy are planning to leave. Official data on Monday showed better than expected growth for the first quarter but indicated that Chinese consumer activity was beginning to wilt. In response, Beijing published 23 measures to support infrastructure projects and the country’s struggling property sector as well as help for stricken industries. The People’s Bank of China has reduced the amount of reserves that banks must maintain in an attempt to boost the economy, but interest rates remain unchanged.Baby bust, our new series, examines how the pandemic has affected population growth and compares policy responses around the world.Join us on April 26-27 at the Future Cities Americas forum where we will bring together government leaders, corporates, innovators, academics, investors and financial services to establish a common vision for the sustainable, equitable and safe cities of tomorrow. As a newsletter subscriber you can register free today here.Need to know: businessMultinationals are still paying almost 200,000 employees in Russia despite pledges to suspend or end their operations, according to FT analysis. Mass sackings or nationalisations could follow as hopes of a swift end to the war in Ukraine fade. Russia’s recently developed domestic payments system is helping the country overcome the withdrawal of Visa and Mastercard.Netflix shares plunged as the video-streaming company said its decade-long run of subscriber growth had ended in the first quarter. “Now the easy-money years of streaming are ending, just as Hollywood’s golden years did,” commented the FT Lex column. Evidence is already mounting that hard-pressed UK consumers are busy ditching their various subscriptions. Another pandemic boom that might be fading is food delivery. Shares in Just Eat — as with its rivals DoorDash, Deliveroo and Delivery Hero — have plunged as intense competition makes it difficult for any operator to make money. Just Eat is mulling a sale of its Grubhub business in response. Surging inflation and the war in Ukraine are expecting to feature heavily as first-quarter earnings season in the US picks up steam. Groups representing 70 per cent of the S&P 500 by value are reporting before the end of the month. Average growth in earnings per share is estimated to reach just 5.2 per cent, a sharp drop from the 32 per cent of the fourth quarter of 2021. Higher costs of living are also feeding through to wage demands. Workers at GlaxoSmithKline have voted to strike over a below-inflation pay rise, the first such action in the drugmaker’s history and unusual in Big Pharma.There are no such worries at the other end of the pay scale: the bumper bonus is back. Huge recent payouts are all the more jarring because they come just as consumers face steep rises in the price of energy and food, writes US investment and industries editor Brooke Masters.Meanwhile, drowning your sorrows is set to get a lot more expensive. Heineken, the world’s second largest brewer, is putting up beer prices because of “off-the-charts” increases in costs, even though sales are up as punters return to bars.Airlines are split on mandatory masks for passengers after a US judge blocked the government from enforcing the rule. Shares in Uber and Lyft leapt after the ride-sharing companies said they would drop mask requirements for US customers.The head of Korean Air told the FT that South Korean authorities needed to speed up the lifting of pandemic restrictions, describing it as “nonsense” that a PCR test is required for inbound passengers. In the UK, ministers are loosening strict requirements on background checks for new employees to help airlines address severe staff shortages.Fallout from the war has added to financial problems at Credit Suisse, which now expects a first-quarter loss.UK gym operators are snapping up prime retail slots in struggling high streets and shopping centres hit by the shift to ecommerce. Vacancy rates remain high, with 14 per cent of retail and leisure venues forecast to remain empty in the first half of this year. But etailers are not immune from problems: Amazon last week said it would add a surcharge on its US sellers to offset growing inflation and fuel costs. The World of WorkDeloitte has significantly cut back its London office space in the latest sign of how hybrid working has disrupted the commercial real estate market. The sector is also facing higher costs from environmental regulations as well as the rise of flexible working groups such as WeWork.Technology may have made working from home a lot easier but it has also made it harder to take sick days, writes Emma Jacobs. “We have to be mindful that the lesson from the pandemic is flexible working and not working round the clock,” says one expert.Another worrying indicator is the growing exhaustion felt by many workers from endless meetings, whether online or in person. “I keep hearing from so many people that they are simultaneously craving face-to-face contact but are also overwhelmed by it,” writes Viv Groskop.The advantages of experienced older workers have never seemed more obvious, says columnist Pilita Clark. But these same people are vanishing from their desks at much higher rates than their mid-career colleagues in a reversal of an important pre-Covid trend towards older workforces, she writes. What can companies do when faced with this outflow of workers and what can managers do to retain staff? Listen to our latest Working It podcast on the Great Resignation and sign up for our Working It newsletter.Get the latest worldwide picture with our vaccine trackerAnd finally.Do you think marriage, for all its imperfections, is still the best path to fulfilment? Or do you concur with one writer’s view that it’s merely a “life-long market correction to true love’s overvaluation”? William Skidelsky reviews three new books exploring the lingering appeal of an institution that is under threat. © Getty Images More

The head of the IMF has said Ukraine will need $5bn a month for the next three months to plug the hole left by the crippling impact of Russia’s invasion on the country’s finances. Kristalina Georgieva, the fund’s managing director, said the IMF would discuss Ukraine’s financing needs with the country’s partner governments. Georgieva suggested the support should come in the form of grants as part of a co-ordinated effort from the fund’s member countries.“A big part of the economy is not functioning,” Georgieva told reporters on Wednesday. “Filling this financial gap is best done by relying on grant financing — that is what we want to see.” David Malpass, president of the World Bank, said his organisation was working on a $170bn package of support for developing countries worldwide over the coming 15 months. The package would help tackle the economic cost of the war, the impact of the pandemic and the climate emergency, he added. “The war is putting stress on poor people around the world, adding to the debt overburden in many countries and — through shortages of food, fuel and fertiliser — creating a food insecurity crisis that will last at least for months and probably into next year,” Malpass said on Wednesday.The commitments, made during the IMF and World Bank’s spring meetings, come after Ukraine’s finance minister Sergii Marchenko last week called for immediate financial support of tens of billions of dollars to cover the country’s fiscal deficit. Public spending exceeded revenues by about $2.7bn in March and Ukraine expects the gap to widen to $5bn-$7bn a month in April and May. The spring meetings have exposed the difficulties of co-ordinating global economic policy at a time of heightened geopolitical tensions.At the meeting of senior finance officials from G20 economies on Wednesday, the British, US and Canadian delegations left in protest at Russia’s participation. “Alongside our allies the US and Canada, representatives from the UK left the G20 meeting as Russian delegates spoke,” a spokesperson for the British delegation told Reuters. Andrew Bailey, governor of the Bank of England, was among those who walked out, the BoE confirmed.The IMF expects Ukraine’s economy to contract by 35 per cent this year, as the war chokes off output. The invasion had placed the government under “great stress” as tax revenues dropped, Marchenko warned in an interview with the Financial Times. Sergii Marchenko, Ukraine’s finance minister, has called for immediate financial support of tens of billions of dollars to cover the country’s fiscal deficit © Ministry of Finance of UkraineGeorgieva said the fund’s “first priority” was to ensure the support needed over the next three months was there. She suggested the financing could be delivered through a new account, established by the lender’s board of governors this month, that is structured to receive grants and loans “aimed at assisting Ukraine to meet its balance of payments and budgetary needs and help stabilise its economy”.Canada has already said it will allocate up to $795mn to the account. Marchenko also called on rich countries to use the new account to pledge the funds they received from the IMF in August as part of a $650bn allocation of the lender’s reserve assets or special drawing rights. Advanced economies received roughly $290bn as part of the disbursement, of which Marchenko wants between 5 and 10 per cent to go to Ukraine.Malpass said on Wednesday the bank was readying a $1.5bn payment to help cover public sector wages and other budgetary needs. The payment would come on top of almost $1bn in emergency finance disbursed to Ukraine soon after the invasion. He said the bank would hold meetings on Thursday “with Ukraine and with supportive countries to provide the assistance for the near-term and longer-term needs of the Ukrainian people”.Georgieva on Wednesday added that the fund would also start to structure a new programme with Ukraine, but said it would not be implemented while “hostilities are still ongoing”.“It is unfair to expect from Ukrainian authorities to develop and implement a far-reaching package of reforms at this time.” More

Michael Pettis is a finance professor at Peking University and a senior associate at the Carnegie China Center.China’s recently released economic data illustrate just how difficult it has been for the authorities in China to implement economic policies to expand sustainable domestic demand. While first-quarter GDP grew nominally by 8.4 per cent year on year (4.8 per cent in real terms), household disposable income rose by much less — 6.3 per cent — suggesting that the share of GDP retained by Chinese households declined by at least one percentage point over the past year.Consumption put in an even more worrying performance. First-quarter retail sales — a widely-used proxy for consumption — grew year on year by just 3.3 per cent. This suggests that the consumption share of GDP declined by at least two percentage points over the year, partly because of higher, Covid-related savings and partly because of lagging wage growth.On the other hand, growth in fixed asset investment, industrial output and exports soared. The trade numbers were especially instructive. In the first quarter of 2022, China’s total foreign trade grew a little faster than GDP, but this growth wasn’t evenly distributed. Exports grew year on year by 13.4 per cent, more than one and a half times the growth rate of the economy overall. Over that same period, imports grew by 7.5 per cent, more slowly than GDP and much more slowly than exports.This really isn’t the way trade is supposed to work. If the revenues generated by rising exports are properly distributed domestically, as they normally are in a well-functioning economy, imports should rise just as quickly as exports.Instead, China had the highest first-quarter trade surplus in its history, the latest in a line of record-breaking trade surpluses. These surpluses are symptoms neither of manufacturing prowess nor of a culture of thrift, but are instead a consequence of the great difficulty China has had in rebalancing its domestic economy.And yet for years Beijing has stressed the need to boost domestic demand, so what has gone wrong? The problem seems to be that Beijing is only able to implement various forms of supply-side policies, including business subsidies, export subsidies, “window guidance” for bank lending, investment in infrastructure and logistics, business tax rebates and so on. After three very successful decades of relying on supply-side measures to boost growth, Chinese authorities in the past decade have found it very difficult — almost certainly for both political and institutional reasons — to switch to demand-side measures to support growth.Even when they specifically try to address consumption, they still end up proposing mainly supply-side policies. Last week, for example, the State Council, recognising explicitly the need “to boost consumption as part of the effort to keep economic fundamentals stable”, proposed a series of policy measures to increase consumption. These consisted of tax rebates, better logistics and warehousing, improved policing of counterfeit goods, easier online shopping, a reduction of restrictions on automobile purchases, relief policies for hard-hit producers of consumer goods, and so on.There were few if any demand-side proposals, however, that could boost consumption directly by increasing the share that households receive of their total production. All of the declared policies to support consumption do so by subsidising the production and distribution of consumption and export goods.The problem is that while these various measures may affect the ways in which Chinese households spend on consumption, and may direct consumption into favoured sectors, they cannot actually boost the role of consumption in driving growth. There are only two ways policymakers can increase the consumption share of GDP. One way is to force banks to increase consumer lending, which China did for many years but is now trying to rein in. The other way is to increase the household share of GDP — either directly, for example though higher wages, or indirectly, through currency appreciation, stronger social safety nets, or more state services. These are literally the only two ways to raise consumption’s share of economic output. That is why China’s “consumption-enhancing” policies have not and cannot rebalance overall demand. This isn’t because of any inherent superiority of demand-side policies over supply-side policies in supporting economic growth. Either set of policies can work, but under different circumstances. When business investment is constrained by scarce capital, poor infrastructure, or supply-side bottlenecks, as they were for the first three decade of China’s reform period, supply-side measures are likely to be most effective in boosting sustainable growth.But when business investment is constrained by weak demand, as it clearly has been in China for over a decade, supply-side measures can only boost savings and excess capacity. In that case policymakers must implement policies that boost sustainable demand directly.The good news is that an increasing number of prominent economic policy advisers recognise the problem, and have called for direct demand-side support. Earlier this month, for example, Yao Yang, dean of Peking University’s National School of Development wrote in an essay that “promoting consumption remains a pressing priority”, to which end he recommended converting a portion of supply-side subsidies into demand-side support, specifically suggesting “giving the people cash to promote consumption.”This won’t be easy to manage. After three-four decades of supply-side policies, many of them taken to extremes never before seen, it isn’t surprising that China’s political, financial, and legal institutions are powerfully structured around a continuation of such policies.But until Beijing is able to shift towards implementing demand-side policies that boost the consumption share of demand — and with it, business investment — by directly or indirectly increasing the share ordinary Chinese households retain of China’s total production, we are likely to see the same sort of data throughout the rest of the year. Economic growth will be powered by unwanted infrastructure investment, manufacturing subsidies, surging exports and rising debt, while household disposable income continues to lag, along with consumption and imports. For now, this remains the seemingly never-ending story of China’s economy. More

Atlanta Fed President Raphael Bostic expressed concern about the impact that rate hikes could have on the U.S. economic recovery.
Bostic said the fed funds rate could be as low as 1.75%.

Atlanta Federal Reserve President Raphael Bostic on Tuesday expressed concern about the impact that rate hikes could have on the U.S. economic recovery, saying the central bank shouldn’t move so fast that it chokes off growth.
Bostic did not commit in a CNBC interview to what pace the Fed should take in increasing benchmark rates. Instead, he said policymakers should be measured in their approach and watch how what they do impacts conditions.

“I think I’m in the same areas as my colleagues philosophically,” he told CNBC’s Sara Eisen in a “Closing Bell” interview. “I think it’s really important that we get to neutral and do that in an expeditious way.”
“Neutral” is considered the rate at which the economy is running on its own with rates that are neither boosting nor restricting growth. Bostic said that neutral rate could be between 2% and 2.5% and the funds rate could be as low as 1.75% by the end of 2022. That puts him near the median of the Fed’s “dot plot” of individual members’ projections released each quarter.
“I really have us looking at one and three-quarters by the end of the year, but it could be slower depending on how the economy evolves and we do see greater weakening than I’m seeing in my baseline model,” he said. “This is one reason why I’m reluctant to really declare that we want to go a long way beyond our neutral place, because that may be more hikes than are warranted given sort of the economic environment.”
That puts him in contrast with some of the other Federal Open Market Committee members.
On Monday, St. Louis President James Bullard said he sees the fed funds rate, which serves as a benchmark for many consumer debt instruments, rising to 3.5%. He said the Fed needs to go beyond neutral if it has hopes of taming inflation running at its fastest pace in more than 40 years.

But Bostic said the Fed “needs to be cautious as we move forward.” Inflation could be topping, he said, though he noted that real incomes adjusted for the cost of living have been falling.
“We do need to get away from zero, I think zero is lower than we should be right now,” he said. “But at the same time, we need to just pay attention.”
Market pricing is for rate hikes that would bring the funds rate to 2.5% and the Fed ultimately hiking to around 3.2% before cutting rates in late 2024.
The Atlanta Fed is tracking GDP growth in the first quarter of just 1.3%, though Bostic said he expects the annual pace in 2022 to be around 3%.
“My goal is to have there not be a recession while I sit in this chair, and I’m just going to do all I can to make that be true,” he said.
Correction: Bostic said the neutral rate of interest is between 2-2.5% and the fed funds rate could be as low as 1.75%. An earlier version misstated his position on the neutral rate.

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German producer prices surged at their fastest pace in at least 73 years, raising concerns that the eurozone’s largest economy is at risk of a serious bout of stagflation. Producer prices for industrial products were 30.9 per cent higher in March than they were the same month last year, the sharpest increase since the data series began in 1949. The figures follows downgrades by economists of forecasts for German growth. Costs for German industry were expected to rise sharply on the back of Russia’s invasion of Ukraine, which has sent prices of energy and other commodities soaring. The official rate, recorded by the Federal Statistical Office, Destatis, was higher than the 28.2 per cent forecast of economists polled by Reuters. Andrew Kenningham, economist at Capital Economics, said: “The extent and particularly the breadth of the rise in producer prices suggests that German inflation will remain very high for a long time to come.” The pace of German producer price inflation is now more than twice as fast as during the 1970s, an era marred by stagflation — defined as a period of low growth and high inflation. On Tuesday, the IMF cut its 2022 growth forecast for Germany to 2.7 per cent, 1.7 percentage points below its previous estimate. The downgrade is the biggest across advanced economies, highlighting the exposure of Germany’s energy-intensive manufacturing sector to the conflict in Ukraine. The IMF has sought to play down concerns that the global economy is again at risk of stagflation. Pierre-Olivier Gourinchas, the IMF’s new chief economist, said this week that the risk of a 1970s-style oil shock was now smaller as the world was less reliant on crude.German industry does, however, rely heavily on Russian natural gas imports. Destatis said the price of this gas paid by manufacturers in the country was up by 145 per cent from March 2021. Overall energy prices rose 84 per cent, even with petroleum prices rising by a more modest 61 per cent. The price paid by German companies for other products of which Russia and Ukraine are significant producers, such as fertilisers, feed for livestock, wood products and cereal flour, rose at annual rates ranging between 34 per cent and 87 per cent.Higher factory gate inflation raises the prospect of increased consumer prices in the months ahead, as some businesses pass on their costs to shoppers. Consumer price inflation is already at a post-reunification high of 7.3 per cent. Some economists expect it to rise to double digits in the coming months. Carsten Brzeski, economist at ING Research, described Wednesday’s figure as more bad news for the German economy. “Companies are increasingly seeing profit margins coming under pressure, while households see their purchasing power melting away like snow in the sun,” he said. Kenningham said surging price pressures were “one reason why we think German household spending will be weaker than most expect this year.”   More

The average contract rate on a 30-year fixed-rate mortgage increased to 5.20% in the week ended April 15 from 5.13% a week earlier, the MBA survey showed. It has risen 2 percentage points from one year ago.The bulk of the run up, however, has occurred since the start of the year, causing the fastest climb in home-financing costs in decades as the Fed abandoned a cautious approach to raising its benchmark overnight lending rate in favor of swifter and more decisive action to bring down persistently high inflation. The central bank is also set to decide at its next meeting on May 3-4 to begin reducing its portfolio of $8.5 trillion of U.S. Treasuries and mortgage-backed securities, a stash of assets that had helped keep consumer borrowing costs – for mortgages in particular – low throughout the COVID-19 pandemic. Those expectations for Fed tightening actions have led to a surge in Treasury yields as financial markets reacted. The yield on the 10-year note US10YT=RR, which acts as a benchmark for mortgage rates, is at its highest level since 2018.The latest increase in home-financing costs also led to fewer mortgage applications last week following a small bump in demand the prior week as buyers rushed to lock in rates before they moved higher. The MBA said its Purchase Composite Index, a measure of all mortgage loan applications for purchase of a single family home, fell 3.0% on a seasonally adjusted basis to 254.0, while the refinance index fell 8%. More

Russia’s invasion of Ukraine and the ensuing Western sanctions have already forced the European units of some Russian banks out of business and caused some European lenders to leave Russia or consider such a move.Enria said the exposure to Russia was concentrated in nine banks but even they could deal with a wipe-out of their direct cross-border ties to Russian counterparts and of the equity held in subsidiaries located in Russia. “All banks involved would maintain sufficient headroom over the minimum and buffer requirements,” Enria said in the letter to members of the European Parliament.He said the nine banks would see their capital reduced by 70-95 basis points on average in the event of a wipe-out and for none of them the hit would be bigger than 200 basis points.He added the ECB was closely monitoring banks’ implementation of sanctions against Moscow and warned about indirect risks from the war, ranging from an economic slowdown resulting to volatility in the commodities market.”Supervisors are in regular contact with the relevant banks to monitor their risk profiles, assess their reactions and identify any vulnerabilities at an early stage,” Enria said.The ECB supervises the euro zone’s 115 largest banks. More