Central bank puts pressure on western banks active in Russia

Berlin The Central Bank of Ukraine is putting pressure on Western banks that support Russia in waging the war: “When you stayed in Russia, you decided to support the aggressor and his war crimes,” the National Bank in Kyiv (NBU) accuses of continuing in Russia operating western financial institutions and insurance companies in a statement. “In addition to moral aspects, such a policy contradicts the official position of the governments of the countries of the democratic world and the great support of the Ukrainian people by the population of these countries.”

The background is not only the ongoing business operations and what the NBU believes are “bloody” profits from the financial institutions with their Russian activities, but also the support of Russian soldiers: Russians who fight in the war in Ukraine receive special conditions from banks active in the country. This allows them to defer interest payments and repayments during the war.

At the same time, the Western banks operating in Russia use the terms “Donetsk People’s Republic” and “Lugansk People’s Republic” – the Russian names for the territories annexed under international law in the Ukrainian Donbass. The war is referred to as a “military special operation” on the websites. This is the terminology prescribed in Russia.

From the Ukrainian point of view, they are clearly violating Western sanctions. 45 financial institutions and insurance companies from countries that Russia itself classifies as “unfriendly countries” still operate subsidiaries or businesses in the huge empire. The NBU has now called on the governments and regulators of these countries to take action on their banks.

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In talks with Western institutions, the NBU had repeatedly urged withdrawal from Russia, since banking and credit transactions in Russia are an important pillar of the local economy and political system. There was no progress. “This is unacceptable almost a year after the start of the war,” said an NBU spokesman.

>> Read here: Why German companies can’t just withdraw from Russia

Following the withdrawal of the French Société Générale, the largest Western institutions still represented in Russia are the Vienna Raiffeisenbank International (RBI), the Italian Intesa Sanpaolo, the Dutch ING, the French Crédit Agricole and the Hungarian OTP Bank.

The ruble rolled


Million Euros

earned the Wiener Raiffeisenbank International (RBI) in the pre-war year in Russia – almost 30 percent of the total profit after tax.

Citi has already sold the loan portfolio to another bank. The British HSBC has sold its subsidiary to the Russian Expobank and is waiting for the deal to go through. Société Générale sold its Russian subsidiary Rosbank to Vladimir Potanin, the founder and previous owner, who served as boss from 2006 to 2011. The bank had to write off 3.3 billion euros for this.

Almost a year after the outbreak of war, most other institutes remain cautious. “It takes time, a bank is not a sausage stand that you can close in a week,” said RBI boss Johann Strobl at the end of March 2022.

Especially the Viennese Raiffeisen under pressure

Russia is a particularly important market for RBI: In the pre-war year, business there contributed EUR 474 million, almost 30 percent to profit after tax. With a profit of 122 million euros, the Ukraine activities were also well above the percentage that the country accounted for in the overall RBI business.

Bank boss Strobl and his board colleague Andreas Gschwenter have a seat and a vote on the supervisory board of the Russian RBI subsidiary, while Strobl heads the supervisory body. Both are therefore on a Ukrainian sanctions list. The RBI rejected the recent allegations of support for Russian soldiers on Twitter, saying that the bank acts “according to the laws of the country in which it is located”.

Crédit Agricole said it had scaled back its lending business in Ukraine. ING wants to have reduced its Russia risk by 2.9 billion euros or 43 percent to 3.8 billion euros by the end of September. Like most other western institutions, OTP refers to a decree by President Vladimir Putin: In August, he banned sales by foreign banks until the end of 2022. It is currently unclear whether this decree will continue to apply.

With few exceptions, the Western institutes had taken their time. “We don’t want to simply give away our shares to Russia or to businessmen close to Putin,” a bank manager working in Russia told the Handelsblatt.

In the end they will leave Russia. Because the risk is too great that the United States will classify Russia as a terrorist state. Michael Zhernov, Managing Partner at the investment company Millstone

“But in the end they will leave Russia,” Michael Zhernov, managing partner at the investment company Millstone, is convinced. “Because the risk is too great that the United States will classify Russia as a terrorist state” – and dealings with terrorists are severely punished by Washington.

So far, employees have only accused Deutsche Bank of not having closed its technology centers in Moscow and Saint Petersburg, an IT expert from the Frankfurt Institute reported to the Handelsblatt. Russians are thus still part of the bank’s global programmer network. With this degree of networking and the increasing activities of the Russian domestic secret service FSB at foreign companies in Russia, there is a considerable security risk.

Anger prevails in Ukraine, especially among the employees of Raiffeisen and OTP. While Russia is invading their country and the Russian business is damaging the image of the brands, the employees of the institutes in Ukraine are helping the country’s army. 150 Raiffeisen employees are soldiers in the war and continue to be paid by the bank. The Ukrainian subsidiary of RBI has also handed over 77 armored vehicles, mostly money transporters, to the army – half of the armored vehicle fleet.

More: Outrageous luxury, corruption – this is how Putin’s military elite lives

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