Banks in Germany are expected to set aside additional funds to deal with a potential surge in defaults if Russia cuts off natural gas supplies, according to several high-ranking banking officials quoted by Bloomberg.

According to BNP Paribas Germany head Lutz Diederichs, as quoted by the media, if Russian gas supplies are completely cut off, Europe's largest economy is expected to enter a recession, and lenders will be required to bolster corporate loans with additional capital.

He echoed comments made by Commerzbank Chief Financial Officer Bettina Orlopp in an interview with the weekly Focus Money published over the weekend.

Senior financial executives are reportedly concerned about planned maintenance at the Nord Stream pipeline, which connects Germany and Russia, as several EU officials have questioned the possibility of resuming supplies.

Read next: EU needs at least 3 years to replace Russian gas: Fitch

According to the operator, both pipeline strings will be shut down for annual maintenance from July 11 to July 21, with the shutdown previously agreed upon with all partners.

German lenders' precautionary measures in the face of potential economic consequences from Russia and the West's current sanctions campaign have thus far been less than the large reserves they hoarded during the Covid-19 pandemic.

Germany is heavily reliant on Russian energy imports, and the country's economy would suffer if it lost access to the supply.

According to reports, Deutsche Bank CEO Christian Sewing has stated that such an occurrence would result in a "deep recession."

It seems that some of the countries pushing for sanctions on #Russia are the biggest importers of Russian fossil fuel.

Here are the top importers of #Russian fossil fuel and countries that cut their reliance on Russia.#Ukraine #NATO #EuropeanUnion pic.twitter.com/2IBFd13s6A

— Al Mayadeen English (@MayadeenEnglish) July 3, 2022