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After the US warnings, the European Central Bank moves...
The European Central Bank has issued an ultimatum to all Eurozone banks with branches in Russia to speed up their withdrawal plans, amid fears they could be hit by US punitive measures.
The ECB has written to lenders in recent weeks asking for detailed plans on their exit strategies, according to several sources. Lenders must provide the regulator with an "action plan" for their Russian business as early as June.
Last week, Austria's Raiffeisen Bank was forced to abandon a deal to swap assets in Russia with those in Europe after pressure from US authorities. The US intervention has raised concerns at the ECB that the RBI and other lenders could be targeted in the coming days.
"This could lead to serious damage to the banking system if US authorities take sanctions," said a person briefed on the ECB's stance.
The documents underscore growing pressure from Washington on European groups that may support Russia's war in Ukraine more than two years after the invasion.
"The ECB's response to US interventions shows Europe's heavy dependence on the US," said an adviser to banks with Russian subsidiaries. "We are more followers than leaders in trials involving European companies," he continued.
The US Treasury did not immediately respond to a request for comment.
The person briefed on the ECB's position said supervisors there wanted to avoid European banks suffering a similar fate to ABLV, a Latvian bank that was closed after the US Treasury department accused it of "money laundering institutionalized," as well as violations of North Korean sanctions. It then cut off its access to the US financial system in 2018.
The letters from the ECB were written with varying degrees of severity, depending on how advanced each bank is in withdrawing from Russia, according to people with knowledge of their contents. The central bank has called on eurozone banks to seek an exit from Russia since Moscow began its full-scale invasion of Ukraine in February 2022.
Raiffeisen Bank, which has the largest exposure to Russia, has been told to cut its lending in the country by two-thirds from current levels by 2026. The bank, which faces possible fines from the ECB if it fails to fulfill, it has already shrunk its stockpile of Russian loans by 56 percent since the start of the war.
Meanwhile, other banks including Italy's UniCredit - the lender with the second largest exposure - have been asked to provide the ECB with a detailed outline of their plans for their operations. UniCredit has been given a deadline of June 1 to respond. The ECB declined to comment.
UniCredit and OTP - the Hungarian bank not under direct ECB supervision - last year began repatriating profits from their Russian subsidiaries in the form of quarterly dividend payments.
Last year, UniCredit received 137 million euros from its Russian branch, while OTP received 135 million euros. UniCredit declined to comment. OTP said the repatriated dividends were part of its efforts to reduce its presence in Russia.
The RBI's frozen profits were initially intended to be repatriated as part of the planned €1.5 billion asset swap deal. The bank abandoned the deal this month after the US Treasury warned the lender it risked being cut off from the US financial system if it went ahead.
US authorities are also concerned about recent reports from the Financial Times about Raiffeisen's expansion into Russia. The bank published 2,400 job advertisements between December and mid-April, many of which said the bank was looking to grow locally. / Adapted "Pamphlet" from " Finacial Times "
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