European banks are finding it difficult to part with Russia, as their profits have even increased since the start of the full-scale war. At the same time, as some banks explain, it is almost impossible to leave the aggressor country without significant losses. This was reported by Bloomberg, according to UNN.
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Since the start of Russia's full-scale invasion of Ukraine in 2022, the total number of CEOs of the five EU banks with the largest operations in Russia has fallen by only 3%.
It is noted that bank profits during this period increased by about three times. This was due to the high interest rates they receive for their money stuck in the country.
The slow pace has led the European Central Bank to press those lagging behind to speed up their departure. One reason for the concern is that a continued presence in Russia risks exposing banks to U.S. sanctions and heavy fines. The supervisor has asked all banks with large businesses in Russia to "accelerate their risk mitigation efforts by developing a clear roadmap for downsizing and exiting the market
Western sanctions, combined with local regulations and punitive sales taxes, make it difficult for banks to move money out of Russia. Subsidiaries of foreign banks in Russia, of course, have to comply with local rules, which may contradict the ECB's pressure on the parent company. They face the risk of retaliation: the Kremlin sometimes seizes assets of companies or individuals from countries it considers unfriendly.
The publication emphasizes that the only major EU bank that has made a complete breakup is France's Société Générale SA, which is selling its largest Russian subsidiary. After the sale of two smaller units, Société Générale reduced its staff in Russia by more than 99%.
At the same time, even after Deutsche Bank AG reduced its employees in Russia, the bank made higher profits last year than in 2021. This process is quite typical for those who still hold funds in Russia. For example, the profits of a subsidiary of the Austrian Raiffeisen Bank International more than tripled, and Intesa's profits increased about 20 times.
At the same time, the profits of the Austrian Raiffeisen Bank International subsidiary have more than tripled, and Intesa's have increased about twentyfold. For some banks, "the contribution to profits is higher than before the war. Bloomberg Intelligence analyst Tomasz Nocel believes that there is a high risk of unintentional violation of sanctions.
American banks have faced similar problems. Citigroup Inc. suspended almost all institutional banking services in Russia early last year, although it still has $7 billion tied up in the country. JPMorgan Chase & Co. says it had about $350 million stuck in Russia as of March.