European Banks Look to Leave Ukraine amid Growing Political Tensions

The banking market in Ukraine has been highlighted as one of the leading risks for the emerging market banking sector because of political tensions.

According to a report by the global information company IHS, a number of major European banks were looking to pull out of the country.

Ukraine has been in the news with its high-profile energy dispute about gas supplies with Russia.

It has just signed its second major shale gas deal for 2013 worth $10bn with the American energy giant Chevron.

"With Ukraine on the brink of decisive and far-reaching political movements, three of central and eastern Europe's largest lenders are investigating exiting the country.

"Italy's UniCredit and Intesa Sanpaolo are officially seeking a buyer for their Ukrainian units, while Austria's Raiffeisen said it is keeping its options open regarding Ukraine," said the IHS report.

"In October, the IHS Banking Risk team downgraded the outlook on Ukraine's risk rating to Negative from Stable on the back of a deterioration of Ukraine's macroeconomic imbalances, combined with recent political pressures that could have severe implications for financial stability," it added.

Concerns about Ukraine's economic stability have been mentioned in a note by officials from the International Monetary Fund.

The Washington-based lender sent a 10-day mission led by Nikolay Gueorguiev to evaluate the economic situation.

The mission concluded: "Ukraine's significant external financing needs remain a key vulnerability."

"Limited exchange rate flexibility, a large budget deficit, and sizable quasi-fiscal losses in the energy sector have given rise to a large external current account deficit and a steady loss of foreign exchange reserves," it added.