An employee poses for a photo while demonstrating a payment card at a branch of VTB Bank in Moscow, Russia, May 30, 2019. REUTERS / Evgenia Novozhenina / Photo file
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FRANKFURT, March 2 – Regulators are preparing for the possible closure of the European branch of Russia’s second-largest bank, VTB Bank (VTBR.MM), amid growing concerns about the impact of Western sanctions on the bank following Ukraine’s invasion. two familiar sources.
VTB Bank’s European operations could be closed for days by regulators in Germany, where it operates mainly on the continent, said a person directly familiar with the situation.
The second source said BaFin, the German regulator, is on high alert, closely monitoring the situation and ready to act if necessary, although no final decision has been made.
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VTB did not respond to a request for comment.
On its German website, VTB told its customers that their money was safe and the bank’s economic situation was “stable”.
Russia’s finance ministry in Moscow and embassy officials in Berlin did not respond immediately to requests for comment.
BaFin declined to comment.
A spokesman for the Bundesbank, which shares responsibility for banking supervision, declined to comment on a particular bank when asked about Russian banks in Germany, but said it was in close contact with BaFin in that regard. “If necessary, we will take appropriate measures,” the spokesman added.
If regulators decide to close VTB in Europe, it will mark the second bankruptcy of a major Russian bank in the region, as Western sanctions put pressure on the country’s creditors. Most of Sberbank’s European operations, Russia’s largest bank, ended earlier this week. Read more
VTB, which has more than € 4 billion in deposits in Europe, mainly in Germany, will be covered by Berlin’s deposit protection scheme, which protects savers by up to € 100,000.
BaFin said VTB would not accept new customers and that existing account holders had access to their money.
However, supervisors have been monitoring the outflow of deposits since Russia invaded Ukraine, said a source familiar with the situation. The man added that the sanctions make it difficult to recapitalize the bank to meet the demands.
VTB has become one of the main targets of economic sanctions against Moscow in recent days since Russia’s invasion of Ukraine. Read more
On Wednesday, he was excluded from the SWIFT messaging system, which supports global transactions.
This followed US sanctions last week, effectively ousting the bank from the US financial system, banning trade with Americans and freezing US assets.
An EU official who asked not to be named said VTB was in a similar position to Sberbank, as both had been sanctioned and tarnished Europe’s reputation.
According to the latest quarterly reports, VTB had assets of around 8 billion euros in Europe. Its European clients include 600 companies, 150 Russian financial institutions and 160,000 private clients, according to its website.
In recent years, ordinary Germans and local authorities have also parked their money in VTB in part because it was one of the few banks that did not charge negative interest rates.
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Additional reports by Frank Siebelt in Frankfurt and Jan Strupczewski in Brussels; Edited by Paritos Bansal and Edward Tobin
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