The European Central Bank (ECB) has urged Eurozone banks (20 countries using the euro) operating in Russia to withdraw, expressing concerns over the impact of U.S. sanctions.
According to major foreign media, the ECB has sent letters to these banks over the past few weeks demanding specific plans related to their withdrawal from Russia. Accordingly, the banks must submit their Russia exit implementation plans to the ECB as early as next month. It is reported that the pressure in the ECB’s letters varied depending on the scale of each bank’s operations in Russia. The ECB also emphasized in the letters that U.S. pressure on European institutions supporting Russia has increased amid Russia’s ongoing invasion of Ukraine for over two years.
This measure by the ECB stems from concerns that Eurozone banks could become targets of U.S. sanctions in the future. Previously, in 2018, Latvia’s ABLV was cut off from access to the U.S. financial system for organizing money laundering and violating North Korea sanctions.
As a result of this action, Italy’s largest bank UniCredit, which has the second-largest Russian operations among Western banks, was reportedly required to provide detailed operational plans to the ECB by the 1st of next month. UniCredit and Hungary’s OTP Bank, which is not directly supervised by the ECB, began receiving profits from their Russian subsidiaries established last year in the form of quarterly dividends.
European banks’ Russian subsidiaries can remit up to half of their net profits to their parent companies only if they pay taxes locally and request permission from Russian authorities. Last year, UniCredit reportedly received 137 million euros (approximately 201.8 billion KRW), and OTP received 135 million euros (approximately 198.8 billion KRW) in remittances.
Additionally, Austria’s Raiffeisen Bank International (RBI), the largest Western bank in Russia, was ordered to reduce its loans in Russia to two-thirds of the current level by 2026. Failure to comply could result in fines imposed by the ECB. The bank has already reduced its Russian loan portfolio by 56% since the outbreak of the Ukraine war. However, U.S. authorities remain concerned about RBI’s expansion of its Russian business. It is reported that a significant number of the 2,400 job advertisements posted by the bank from December last year to mid-last month indicated efforts to seek business growth.
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