The retreat of Europe’s banks from Moscow is entering its final stages, but behind them is the European Central Bank, in place of General Winter.
The ECB is cracking down on the last significant banking presence in Russia. It is one element of a multifaceted, if unevenly implemented, strategy to withdraw Western capital and Western expertise from an economy that has been mobilized to support the largest act of aggression on the continent in 80 years.
Last week, Austria’s Raiffeisen Bank International, by far the largest European bank operating in Russia, said it expected to receive a binding requirement from the ECB to reduce its business there, while reuters Italian-based UniCredit was reported to be preparing for a similar letter. Both banks declined to comment for this article.
According to the ECB’s condition, Raiffeisen must reduce its balance sheet by 65 percent by 2026 from the level at the end of the third quarter of last year. It had already halved compared to the day Vladimir Putin launched his troops against Kiev.
Similarly, Italy’s UniCredit has reduced its exposure to Russia by 90 percent since the invasion. And Dutch-based ING, whose local corporate banking unit flourished in the former Soviet Union with industries like Heineken and Shell, has also cut its cross-border exposure by more than 80 percent to just €1.3 billion as of February.
Essentially being forced to scale down corporate banking operations will make it harder for European industry to do any kind of work in Russia. But the impact on Raiffeisen, which has about 10,000 employees across a retail network of more than 120 branches, is of an entirely different magnitude.
new timeline threat of Its plan is to salvage anything from what has for years been the country’s largest and most respected foreign-owned retail bank, an operation that sometimes generated more than half of the group’s profits.
Raiffeisen has attempted an exit by swapping equity in its local subsidiary for a stake in construction company Strabag, which is based in Austria and focuses on Central and Eastern Europe. However, the deal is stalled. This stake used to be with metal tycoon Oleg Deripaska. However, it was transferred to a new holding company late last year, the ultimate beneficiaries of which are unclear. As such, it is difficult to verify that this deal will not benefit anyone currently under Western sanctions.
The ECB’s order means that, by the time such issues are resolved, there will be very little left to sell. Meanwhile, like any European company where the Russians had legally accumulated an interest before the war, Strabag is grappling with indefinite uncertainty.
But the slow pace of the sale process had frustrated regulators on both sides of the Atlantic. Earlier this year, Acting Assistant Treasury Secretary Anna Morris was responsible for implementing the sanctions caution Raiffeisen said it risked exposing itself to new sanctions powers that were given to the Office of Foreign Assets Control late last year in a bid to put further pressure on Russia.
Raiffeisen’s fate contrasts sharply with that of Société Générale, which collapsed within four months of the invasion. Agreed To sell its local operations, Rosbank, to the Interros holding company of another metals tycoon, Vladimir Potanin. The deal was made easier by the fact that Sokgen and Potanin jointly ran Rosbank for several years before 2022, while Raiffeisen built its business from scratch. And unlike Deripaska, Potanin was not on the sanctions list at the time – although both Rosbank and got included in It’s been there ever since.
ECB’s action ‘came out of nowhere’
The ECB declined to comment for this article, but Claudia Buch, who took over as chair of its supervisory board at the beginning of the year, Said In March: “For those banks that are still out there… we have given them clear expectations about how we expect reduction in activities and exit strategies.”
In the months following Russia’s invasion in February 2022, the ECB said little publicly about what it expected from banks operating there, with Andrea Enria (Buch’s predecessor) saying that exposures should be reduced. It was “the right thing to do.” The wider impact of the war on the European economy, and consequently its banks, was of far more immediate concern to Enria at the time.
Letter to MEP from long time ago june The supervisor had already indicated last year that it expected the size of banks in Russia to shrink rapidly, warning of “reputational risks” for those that continued. Nicolas Veron, a fellow at the Peterson Institute, said the move reflects the fact that remaining in Russia in any size now “represents a threat to the bank’s franchise and the integrity of its management.”
A person close to the process confirmed that the ECB’s latest move “came out of nowhere.”
He said the ECB’s move appeared to be unrelated to the broader horse-trading going on between the US and the EU over how best to support Ukraine.
At a meeting of G7 finance ministers and central banks in Washington last week, the European group strongly objected to suggestions that Russian assets in Europe could be frozen. Confiscated Helping finance Kiev’s war effort. the house of Representatives unlocked A $60 billion aid package for the country came within three days of that meeting, even though the bill had been pending for months.
“The ECB just wants the topic to die down,” the person said.