ECB Calls on Banks to Assess Risks amid Ukrainian Crises

European Central Bank's Governing Council member Francois Villeroy de Galhau said the worsening Ukraine crisis means the ECB will put more emphasis on its flexibility and options as it exits stimulus measures and turns towards higher interest rates.

Sources told Bloomberg that the bank is working with banks to assess risks to liquidity, loans, trades and currency positions, in addition to their ability to continue operations.

The ECB is seeking to get lenders to assess scenarios, including imposing severe economic sanctions on Russia as well as the repercussions in the event of a Russian invasion of Ukraine.

Markets are currently pricing in the ECB's October increase. However, member of the board of directors, Robert Holzmann said on Wednesday that the bank should make a decision on its first rate hike of the summer, before the end of its asset purchases, followed by a second step at the end of the year.

The United States, the European Union and the United Kingdom set sanctions against Russia after President Vladimir Putin recognized two republics in eastern Ukraine and secured the authority to deploy forces in the regions. The Kremlin insisted that Russia had no plans for a large-scale invasion.

De Galhau said that exposure of French financial institutions to Russia "remains limited", but that European authorities have asked all banks to step up their vigilance over cyber attacks.

"It is clear that we are closely monitoring geopolitical developments and their potential economic and financial implications," he added.

Putin, in an address to the nation, accused America of spending $1 million a day in Ukraine to support coups, arguing that the West controls Ukraine's armed forces. He said that NATO made promises not to expand into the territory of Eastern Europe, noting that Ukraine's accession to NATO threatens Russian national security.