VTB Bank, Russia’s second-largest lender, is preparing to shut down operations in Europe after being hit hard by Western sanctions, according to people familiar with internal discussions. set.
VTB has investment banking operations in London and retail banking in Germany with 160,000 customers, but has decided it cannot operate outside Russia after Western allies froze assets. The bank will be cleared on Saturday from Swift a global payment messaging system that facilitates trillions of dollars worth of transactions every day.
The move follows the decision by Sberbank, Russia’s largest lender, to pull out of central and eastern European markets last week, with its Austrian unit becoming the first bank failed subject to Western financial sanctions. Sberbank and VTB account for more than half of the Russian banking market.
Their withdrawal from Europe effectively ended a 20-year strategy among Russian banks to establish a global presence, which has been severely weakened by sanctions imposed after Russia annexed Crimea in 2014.
“There is no attempt to continue as usual,” said one person involved in the plan.
“We’re trying to get it done as quickly as possible – but operations in Europe are much more complicated than in the UK. We are doing everything we can to get our customers’ money back. It is important that we do this in an orderly manner. “
VTB Europe holds more than €4 billion in deposits for most of its German retail customers, who have had their money withdrawn after the bank doesn’t charge negative interest rates like most other customers. The bank’s clients also include German local governments, 600 companies and 150 financial institutions.
Once employing more than 500 people in an office in the City of London overlooking the Bank of England, VTB’s London operations have since shrunk to 120 employees.
Sanctions following Russia’s 2014 invasion of Crimea – along with the UK’s response to poisoning Sergei Skripal in 2018 and the UK’s departure from the EU – forced VTB to lay off hundreds of workers in London and move many to Frankfurt in recent years.
VTB Capital’s membership on the London Stock Exchange was suspended last month, meaning it can no longer trade securities listed there. It has also defaulted to being a member of LCH, the clearing arm of the London Stock Exchange Group.
When the UK government froze VTB’s assets last month, it issued a 30-day license so the bank could stop trading and pay employees. The license expires on 27 March, at which point UK staff, most of whom are British nationals, will be laid off.
Its European retail business employs 230 people in Frankfurt and an additional 30 in Austria, while VTB also operates a merchandise business in Switzerland’s Zug, employing 60.
Commerzbank customers, Germany’s second largest lender, who tried to transfer funds to VTB Europe were told: “Order not processed due to situation at bank/country receive money”. Commerzbank declined to comment.
VTB did not respond to a request for comment at the time of publication, but earlier this week the bank said: “Like all domestic and international customers and their communities, we are observing developments most recent global developments with great interest.
“For now, we can assure you that the economic situation of VTB Bank (Europe) SE is stable and the bank is fully operational.”
Additional reporting by Olaf Storbeck in Frankfurt