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27 May, 2024 09:41

ECB tells banks to ‘get out of Russia’

Italian lenders must quit the country to avoid a “reputational problem,” a European Central Bank policymaker has warned
ECB tells banks to ‘get out of Russia’

A senior official at the European Central Bank (ECB) has urged Italian banks with operations in Russia to pull out, amid the threat of harsher US sanctions on Moscow over the conflict in Ukraine.

Italy’s UniCredit currently has the second largest exposure to the Russian market among EU-based banks, after Austria's Raiffeisen Bank International (RBI). Another lender, Intesa Sanpaolo, is working to dispose of its business in the country.

From [Russia] you have to get out,” ECB policymaker Fabio Panetta said at a press conference following a G7 finance meeting in Italy, as quoted by Reuters.

”There are objective difficulties because getting out of Russia is complicated… however, you have to get out because there is a reputational problem,” said Panetta, who is also the governor of the Bank of Italy.

The G7 Finance Ministers' and Central Bank Governors' meeting in the Italian lakeside town of Stresa was also attended by US Treasury Secretary Janet Yellen. In an interview with Reuters, Yellen warned that European banks operating in Russia face growing risks, as the US is looking at “potentially a tougher stepping-up” of secondary sanctions on lenders that do business in the country.

Sanctions related to banks’ dealings in Russia would only be imposed “if there was a reason to do so, but operating in Russia creates an awful lot of risk,” Yellen stressed.

The risk of a US crackdown has reportedly spurred the ECB to up the pressure on European financial institutions still working in Russia.

Apart from RBI, UniCredit, and Intesa Sanpaolo, a number of other EU banks – notably the Dutch lender ING, Germany’s Commerzbank and Deutsche Bank, Hungary’s OTP Bank, and Sweden’s SEB –maintain a presence in the Russian market despite Western sanctions.

According to the Financial Times, the regulator has sent letters to lenders with a request for an “action plan” to fold their business in Russia as early as June.

Earlier this month Reuters reported that the US Treasury had threatened to cut off Raiffeisen Bank International (RBI)’s access to the American financial system due to its activities in Russia. RBI said it would start withdrawing in the third quarter of this year following pressure from the ECB.

For more stories on economy & finance visit RT's business section

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