Frankfurt The cooperative DZ Bank has resumed payment transactions with Russian banks after a break of several weeks – with extra control of all transactions. That’s what Thomas Ullrich, the DZ Bank board member responsible for payment transactions, told the Handelsblatt.
“After the start of Russia’s war of aggression against Ukraine, we suspended payment transactions with Russian banks for three weeks,” said Ullrich. “Now, for about seven weeks, we have resumed accepting payments from Russia provided there is no sanctioned entity or person involved. Every payment goes into an individual check, part of which the board decides for itself.”
Like DZ Bank, Landesbank Hessen-Thüringen (Helaba) completely stopped payment transactions with Russia shortly after the outbreak of war – and in some cases started them again. On request, Helaba announced that it is currently only processing sanctions-compliant payments to Russia for its own customers on a very small scale. “The situation is constantly being reassessed.” Other large financial institutions continued payment transactions at the beginning of March, taking into account the sanctions.
According to Ullrich, incoming payments from Russia are cases “in which a German company receives money from deliveries whose contracts were concluded before the start of the war”. DZ Bank also accepts payments from the Russian state for Russian pensioners living in Germany.
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Despite Russia’s attack on Ukraine, some German companies are continuing to do business in Russia or with Russian customers – which has met with fierce criticism. The consumer goods manufacturer Henkel, for example, initially stuck to production in Russia, for which it was widely scolded. A few days ago, the group announced that it would give up business in Russia after all.
Barely involved in oil and gas import transactions
DZ Bank is particularly careful with payments to Russia. According to Ullrich, they are forwarded in exceptional cases – “and in principle only in euros, not in dollars, because the US sanctions are even stricter”. In addition, the companies have to take the risk: “As a rule, the customer himself is liable for the possible consequences.”
DZ Bank no longer conducts payment transactions with Sberbank, the largest Russian bank. The bank is subject to sanctions by the USA, and the EU is likely to follow suit shortly.
Oil and gas imports are usually not paid for through DZ Bank. “DZ Bank is involved in payment transactions for raw materials from Russia, for example, when shipping companies pre-finance the goods they are transporting,” explains Ullrich. The DZ Bank handles the payments, the loans come from Volksbanks and Raiffeisenbanks.
Half of the commission income comes from payment transactions
DZ Bank is the leading institute and central payment service provider for around 770 Volksbanks and Raiffeisenbanks as well as other cooperative banks – they own DZ Bank. The cooperative financial institutions make up around a third of the German banking sector.
According to Ullrich, payment transactions are an “important business area” for the cooperative financial group. “On average, in 2021, an average of 46 percent of a Volksbank’s commission income came from payment transactions, i.e. from account fees and the payment business.” The financial institutions receive a small percentage of the turnover for each card payment.
While some other banks outsource parts of the payment transactions to external specialists, the cooperative banks go the opposite way – which corresponds to the “express wish of the owners”, according to Ullrich. According to Ullrich, DZ Bank wants to process all payments and all payment methods for the cooperative financial group itself on its own platform from mid-2024.
The project became known two years ago. The platform is owned by DZ Bank and the IT service provider of the Volks- und Raiffeisenbanken, Atruvia (until recently Fiducia GAD). It is DZ Bank’s largest project, said Ullrich. He did not want to comment on the costs.
Test for cryptocurrencies with selected customers later this year
The project was supposed to be completed by mid-2023. But because the modernization of the securities settlement system of the European Central Bank, Target2/T2S-Target-2-Securities, will only be completed in November 2022 and thus a year later than planned, DZ Bank has also pushed back the end of its project. In addition, the new uniform standard of the bank message system Swift, ISO 20022, is only announced for the end of this year.
At the end of February it became known that DZ Bank was not involved in setting up the European Payments Initiative (EPI) payment system. The EPI was founded by around 30 financial institutions in 2020, but more than half withdrew.
The aim was to create its own payment system in order to become more independent of powerful US corporations such as Mastercard, Visa and PayPal. The exit of DZ Bank caused disappointment, especially among the German savings banks, the largest competitors of the Volksbanken.
However, DZ Bank is open to offering cryptocurrencies. Ullrich expects “that the cooperative financial group will start a test phase for selected customers this year”.
While many savings bank managers are critical of trading cryptocurrencies for private customers, the cooperative banks are already examining corresponding products. Prototypes are built by DZ Bank and the securities bank DWP. It’s about the target group of self-decided customers. “Nevertheless, we must not let this development pass us by,” warned Ullrich.
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