As the crisis in Ukraine intensifies Feb. 23, European banks are bracing for the impact of new global sanctions. However, U.S. bank executives say they do not expect the industry to be significantly damaged after withdrawing from Russia in recent years.

For weeks, European banks – especially in Austria, Italy and France – have been on high alert in case the government imposes new sanctions on the country, as they are among the world's most exposed to Russia.

Austria's Raiffeisen Bank International (RBI) said it was preparing a "crisis plan", while HSBC warned of market contagion.

After recognizing two breakaway regions of Ukraine, Britain took the lead in retaliating and sending troops on Feb. 22. Prime Minister Boris Johnson struck five banks and three individuals, calling it a relatively modest package that allowed him to "reserve further strong sanctions" for "any action Putin might take next "

The EU also agreed to sanctions banning EU investors from trading Russian state bonds, targeting imports and exports of separatist entities, and blacklisting more politicians, lawmakers and officials.

Survey ranks Ukraine as most knowledgeable about cryptocurrencies, followed by Russia

EU foreign policy chief Joseph Borrell said at a press conference.

“This series of sanctions …… will hurt Russia, and it will hurt a lot.”

German Chancellor Olaf Scholz will stop the certification of the Nord Stream 2 gas pipeline, an important future energy source for Europe's largest economy.

On Tuesday afternoon, in addition to warning Russia of greater costs if it continues its aggression, U.S. President Joe Biden announced sanctions against two Russian banks, the country's sovereign debt and members of the Russian elite and family.

The United States and the European Union have banned arms trade and other technology trade restrictions, such as in the oil industry, blacklisted specific individuals, and attempted to restrict the access of Russian state-owned financial institutions to Western capital markets. Russia annexed Crimea in 2014.

In the U.S., steps have been taken to ensure that banks do reduce their exposure to Russia. The move has made bankers more focused on geopolitically tense markets and less keen on the threat of sanctions to their business.

Even though the bank's direct exposure is limited, the boss of HSBC (HSBA.L), one of Europe's largest banks, said the "broader contagion" in global markets is a concern.

In an interview, Noel Quinn told Reuters.

“Obviously, there is the possibility of contagion or some sort of secondary effect, but it will depend on the severity of the conflict and the severity of the retaliation when it occurs.”

Four executives familiar with industry thinking said Bank of America does not expect global sanctions to have a significant impact on U.S. banking or trigger contagion risk, given the lender's minimal exposure to the Russian economy, meanwhile.

According to the Bank for International Settlements (BIS), U.S. lenders had just $14.7 billion in outstanding claims on Russia in the third quarter of 2021.

As highlighted by three sources, the Biden administration, U.S. banks and financial industry lobby groups have met in recent days to discuss sanctions. One source said the banks have spent much of the past week identifying who could be potential targets of sanctions so they could act quickly.

According to another source, the government had reached out to executives in the industry before Christmas and let the banks know what they thought.

The source added that, although considered unlikely in the near future, the disruption that could be caused if the US decides to target Russia for access to the SWIFT international payments network is a potential area of concern.

This is because the economy and ordinary citizens could be seriously harmed if Russia is cut off from international payment networks, which would create significant compliance and complexity risks for the global banking industry.

However, the Reserve Bank of India (RBIV.VI), which has significant operations in Russia and Ukraine, said business was normal, but said that if the crisis escalates, the plans the bank has been preparing for the past few weeks will come into effect".

Last Tuesday, the Australian bank's share price fell 7.48 percent.

ING (INGA.AS), a Dutch bank with a large presence in Russia, said.

“A further escalation of the conflict could have significant negative consequences.”

A Danish pension fund said it would immediately stop new investments in Russia after Putin entered Ukraine. To reduce the complexity of the sector, bankers said they hope the government will coordinate in drafting the rules and that several jurisdictions will introduce new sanctions.