Raiffeisen Halts €1.5B Russia Deal Amid ECB Pressure

Key Takeaway

• Raiffeisen Bank International AG cancels a €1.5 billion deal involving Russian profits due to regulatory scrutiny and potential sanctions violations, causing a 4.8% drop in shares.
• The ECB urges banks like Raiffeisen and UniCredit SpA to reduce Russian exposure amid geopolitical tensions, with UniCredit aiming to eliminate Russian cross-border exposure by next year.
• UniCredit reduces its Russia operations by 91% in cross-border exposure and scales down local business activities significantly, including a 20% reduction in branches and staff.

Regulatory Scrutiny on Raiffeisen's Russia Deal

Raiffeisen Bank International AG recently announced the cancellation of a complex share deal that would have facilitated the repatriation of approximately €1.5 billion ($1.6 billion) of retained profits from its Russian operations. This decision came after the transaction, which involved acquiring shares in an Austrian construction company from entities linked to sanctioned businessman Oleg Deripaska, faced regulatory scrutiny. Authorities, including those from the United States and Germany, expressed concerns over potential violations of sanctions, leading to a decline in Raiffeisen shares by up to 4.8%. The bank had initially believed the transaction complied with sanctions imposed in the wake of Russia's invasion of Ukraine.

ECB's Directive to Reduce Russian Exposure

In a broader context, the European Central Bank (ECB) has been urging banks with operations in Russia, including UniCredit SpA, to reduce their exposure due to ongoing geopolitical tensions. This directive follows Raiffeisen's public acknowledgment of receiving guidance from the ECB to scale back its Russian business. UniCredit CEO Andrea Orcel confirmed that many European banks with Russian ties likely received similar communications from the ECB. Despite this, UniCredit's strategy has been to gradually reduce its Russian exposure, in contrast to the full-scale exits seen by other banks.

UniCredit's Approach and Adjustments

UniCredit has been proactive in adjusting its operations in Russia in line with regulatory expectations and its own risk management strategies. The bank has significantly reduced its cross-border exposure by 91% and scaled down local business activities, including a 20% reduction in branches and staff. These measures are part of UniCredit's plan to eliminate Russian cross-border exposure by the end of the following year. Additionally, UniCredit has made substantial provisions and write-downs to address the challenges posed by its Russian operations, demonstrating a cautious yet strategic approach to navigating the geopolitical landscape.