According to unnamed sources cited by Reuters, Raiffeisen Bank International (RBI), the most vulnerable Western bank still operating in Russia, is now moving forward with the sale of its Russian assets and is getting ready to spin them off and transfer ownership to its shareholders. If you’re an RBI shareholder, now you have shares of RBI and shares of RBI’s Russia division. That way RBI Russia can be renamed and disassociated from RBI. It’ll remain a headache for the RBI shareholders though, at least those who’d prefer not owning anything in Russia.
RBI faced significant regulatory pressure to develop a strategy for leaving Russia, where it generated 60% of its net profit in the previous fiscal year.
Along with a contentious loan swap for Sberbank of Russia’s loans that are being held hostage in Europe by sanctions, RBI has pared back its Russian business and is considering selling the company as a whole or separating the Russian business into a distinct organization.
The Austrian government reportedly supports a spin-off option, but there are obstacles to overcome, including getting ECB clearance and facing scrutiny from US regulators for violating sanctions.
According to Reuters, in the event of the spin-off, RBI’s shareholders, who are led by Austrian community banks, would control the Russian subsidiary with one share for each they currently own. According to Reuters, it’s still not clear whether the organization would be independent of the RBI.
Whether the ECB would supervise the spun-off bank would depend on how autonomous it was from the RBI, according to insiders. The future oversight of the new entity’s anti-money laundering measures worries US regulators.
The only other bank to be designated as systematically important is Italy’s UniCredit, which is the 10th largest bank in Russia by assets. It now accounts for up to 40% of all payments made into and out of Russia via the Swift network, making it the leading financial transfer facilitator there.