The European Central Bank (ECB) has urged lenders to hasten their withdrawal from Russia due to increased risks of doing business in the sanctioned country, Reuters reported on Tuesday.
According to the outlet, citing ECB supervisory chief Andrea Enria, the matter has taken on new significance following Saturday’s mutiny by the Wagner Group private military company.
In a letter to members of the European Parliament, Enria reportedly said his unit had “urged these banks to speed up their downsizing and exit strategies by adopting clear roadmaps and by regularly reporting to their management bodies and to ECB Banking Supervision on the execution of these plans.” The official pointed to reputational, legal and financial risks associated with doing business with Moscow.
Enria had earlier acknowledged that Russian branches of EU banks have limited their operations and, for example, are no longer granting new loans. He also admitted that the process of divesting from Russia had become increasingly difficult due to new legislation which includes a requirement for presidential approval.
A number of foreign banks have left Russia over the past year amid Western sanctions following the start of Moscow’s military operation in Ukraine. However, several lenders, including some from the Eurozone, continue to operate in the country. These include Raiffeisenbank and UniCredit Bank, which are subsidiaries of Austria’s Raiffeisen Bank International (RBI) and Italy’s UniCredit. Both play a crucial role in the Russian economy, enabling euro payments to and from the country. They are also the only foreign entities on the Russian central bank’s list of 13 systemically important credit institutions.
Raiffeisen announced in April that it was considering selling its business in Russia, but warned that it would suffer significant losses if it decided to divest from the country. The bank’s Supervisory Board chairman, Erwin Hameseder, at the time described critics of the firm’s work in Russia as “morally arrogant” and accused them of “black and white moral thinking.” He claimed that most Western businesses continue to work in the country despite sanctions and geopolitical crises.
Raiffeisen CEO Johann Strobl recently said he was working “at full steam” on a solution as the bank was seeking to hand its Russian arm to shareholders amid mounting pressure from the EU to leave the sanctioned country.
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