Cypriot financial institution RCB to shut retail enterprise in wake of Ukraine warfare

Cypriot lender RCB Financial institution is planning to shut its retail enterprise, making it the primary financial institution to return cash to depositors in response to Russia’s invasion of Ukraine, in line with 4 individuals with information of the interior discussions.

The financial institution, which was based in 1995 as a subsidiary of Russian state-owned VTB Financial institution, has lengthy been a favoured lender for the massive Russian expat neighborhood dwelling in Cyprus.

Previously referred to as Russian Business Financial institution, it’s successfully winding itself up earlier than clients’ concern over the warfare in Ukraine results in it struggling the identical destiny because the Austrian-based subsidiary of Russia’s Sberbank, which was positioned into administration this month after being hit by a run on its deposits.

Banks with Russian shoppers have been significantly badly hit by western sanctions that restrict the scale of recent deposits Russian nationals could make.

RCB is anticipated to announce as early as Thursday morning that it plans to shut its retail operation, in line with individuals accustomed to its plans. The financial institution had €2.8bn of buyer deposits on the finish of 2020, of which €769mn had been retail deposits.

On Tuesday, RCB introduced it had reached an settlement with fellow Cypriot lender Hellenic Financial institution to promote a €556mn performing mortgage portfolio for greater than €500mn. The financial institution mentioned the transaction would enable it to have sufficient liquidity to cowl all its liabilities and meet “its obligations in the direction of all of its clients in full”.

Clients will obtain their deposits in full or have the ability to switch their accounts to rival banks, in line with individuals accustomed to the plans.

After it repays its retail depositors, it intends to surrender its banking licence and wind down its company mortgage guide, the individuals added.

The financial institution declined to touch upon its plans for its retail enterprise.

Banks with shut hyperlinks to Russia have been hit hardest by the west’s sanctions regime concentrating on the nation’s monetary sector in response to Moscow’s invasion of Ukraine final month.

Sberbank Europe, a subsidiary of Russia’s greatest lender, collapsed at first of March, with its EU operations transferred to native rivals or wound down.

VTB, Russia’s second-biggest financial institution, has been winding down its operations in Frankfurt and shedding funding banking workers in London.

The lender, which is majority owned by the Russian authorities, had its property frozen by the UK final month and has been kicked off the Swift international transaction messaging system.

VTB has been step by step promoting down its stake in RCB, which stood at 46 per cent final month. On February 24, the primary day of Russia’s invasion, RCB introduced that VTB’s holding within the financial institution had been bought to “Cypriot shareholders of the financial institution who signify administration”.

The deal elevated the shareholding within the financial institution of its chief govt, Kirill Zimarin, a Russian former VTB govt who has a Cypriot passport.

4 days later, the financial institution printed an announcement saying: “RCB Financial institution condemns warfare and violence in any type. We name for a peaceable resolution as quickly as potential.”

The European Central Financial institution might effective RCB as much as €5mn for not in search of the central financial institution’s approval earlier than finishing the sale of VTB’s stake within the financial institution, which the supervisor was solely knowledgeable of after the transaction had been accomplished, say individuals accustomed to the matter.

ECB officers have lengthy had issues about RCB’s enterprise mannequin and its publicity to Russian pursuits, prompting them to challenge warnings to tighten up its cash laundering and sanctions controls, in line with an individual briefed on the scenario.

RCB was on the coronary heart of an opaque internet of offshore banking transactions that critics say benefited Kremlin-connected figures, together with Russian cellist and businessman Sergei Roldugin, an in depth good friend of president Vladimir Putin. 

Leaked paperwork often known as the Panama Papers that had been printed by the Worldwide Consortium of Investigative Journalists revealed RCB gave Sandalwood Continental, an organization tied to Roldugin, greater than $800mn in unsecured loans and sweetheart offers on curiosity fee swaps from 2008 to 2013.

Whereas central financial institution supervisors are pissed off at being side-stepped by RCB, they’re additionally relieved that the result of the financial institution’s retreat seems to be prone to defend depositors and cut back the publicity of Cyprus’s banking system to Russia, in line with individuals accustomed to their pondering.

The ECB declined to remark.

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