Europe

Sources claim ECB keeping close eye on banks with Russian ties

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Two sources have claimed that the European Central Bank (ECB) is keeping a close eye on banks with links to Russia.

They identified the two banks in particular, namely the Austrian Raiffeisen Bank International (RBI) and the European branch of the VTB Bank, according to a Reuters report yesterday.

The sources maintained that Western sanctions have caused one lender to go under and indicated that the ECB has heightened its scrutiny in the wake of broad financial sanctions against Russia.

They said that the ECB now requires the banks in question to present solvency reports more frequently and to inform its supervisors in Vienna and in Frankfurt about how the sanctions are effecting their operations and assets.

CEO Johann Strobl is quoted in a statement as saying that the RBI’s Russian subsidiary is highly solvent “and recording inflows.”

Western measures against Russia

Western countries including those of the EU, plus the US and the UK have imposed broad financial sanctions against Russia that include banning some lenders from use of the SWIFT international financial communication system.

The move has resulted in bank runs in Russia and on the Sberbank’s EU branch, which earlier yesterday the ECB had declared was failing.

RBI shares dropped 14%, having lost nearly half of their value since 10 February. RBI is the central institution of the Raiffeisen Banking Group Austria and focuses on Eastern Europe.

Roughly 11.5% of its loan book last year was in Russia and the bank had 18% of consolidated equity in Russia. RBI also owns smaller banks in Belarus and Ukraine.

VTB Bank Europe is the VTB unit focused on companies in Europe that do business with their Russian counterparts. The subsidiary is based in Germany, where it takes deposits and is locally supervised.

The central bank of Russia sold approximately 28.3 billion US dollars in roubles at a repo auction on Monday to help banks with their solvency issues. The bank also more than doubled its policy rate and tightened capital controls.

Earlier on Monday, the ECB noted that Sberbank Europe had “experienced significant deposit outflows as a result of the reputational impact of geopolitical tensions.”

It also stated that “Sberbank Europe AG and its two subsidiaries in the banking union, Sberbank d.d. in Croatia and Sberbank banka d.d. in Slovenia, are failing or likely to fail owing to a deterioration of their liquidity situation.”

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