ECB calls on Austrian bank Raiffeisen to withdraw from the Russian financial sector

Five sources with knowledge of the situation told Reuters that the European Central Bank is pressuring Austria’s Raiffeisen Bank International to wind down its highly profitable business in Russia.

Another source with knowledge of the situation who asked to remain anonymous due to the delicacy of the situation claimed that the pressure came after a top US sanctions official expressed worries about Raiffeisen’s operations in Russia during a visit to Vienna last month.

The pressure from Washington and the ECB is raising the stakes for Austria and its second-largest bank, which plays a crucial but also increasingly contentious role in the Russian economy as Moscow’s year-long conflict in Ukraine grinds on. Numerous foreign businesses have already departed Russia, including the French bank Société Générale.

Despite not requesting Raiffeisen to leave the country right away, the ECB wants a strategy for winding down the company, according to two of the sources. One individual stated that such a strategy might involve the sale or closure of its Russian bank.

Since Moscow began its invasion of Ukraine, “We have been asking banks to maintain constant monitoring the activity in Russia, and ideally, cut it and wind it down as much as possible,” an ECB spokesperson said, adding that it has been doing the same with all institutions involved.

According to the sources, Raiffeisen does not currently have any plans to offer such a strategy, and some Austrian government officials view the actions as unwarranted foreign interference.

A Raiffeisen representative stated that the bank was “expediting” its assessment and that it was considering all possible alternatives for its Russia business, “including a carefully managed withdrawal.” The bank also announced that it has cut lending in the nation.

Although other banks, like Italy’s UniCredit, are still present, the Austrian lender is currently the most significant Western bank in Russia, providing a lifeline for payments and handling about one-fourth of euro transfers to the country.

After a week of turmoil in the world’s banking system, one person claimed that ECB officials are reluctant to pressure Raiffeisen into an immediate sale because they are concerned about the potential financial hit.

There could never be a return to the status quo in Austria’s relations with Russia, according to a representative for the finance ministry, but “most” multinational corporations, including banks, continued to do business there.