UNICREDIT is still awaiting a court decision over whether it must immediately reduce its Russia business to comply with an order by the European Central Bank (ECB), months after filing an objection, people familiar with the situation told Reuters.
The near four-month wait for a decision increases pressure on the lender to show it is complying with ECB’s requests. This comes after UniCredit passed the deadlines set by ECB.
It instructed UniCredit at the end of April to scale down its business in Russia including imposing a ban on new deposits and restrictions on handling payments.
In June, the Milan-based bank asked the European Union General Court to annul the demands, which UniCredit chief executive officer Andrea Orcel has said could breach Russian laws.
The bank has also sought to have the measure suspended while the court proceeding is pending, and in July said that a decision on a suspension was expected “in the coming months”.
Representatives for UniCredit, ECB and the European court declined to comment.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
UniCredit has said it “will continue to act on its commitment to significantly reduce its presence in Russia”, and in July reiterated its 2025 targets to scale down its business there.
A summary of the court case – which has not been previously reported – showed that UniCredit asked the judge to annul all ECB’s demands or, alternatively, the orders regarding loans, deposits and payments.
ECB, the lender’s chief supervisor, prohibited UniCredit from granting new loans or rolling over existing loans and imposed a ban on taking new term deposits from Jun 1, indicated court filings.
UniCredit is also contesting a request by the central bank to impose restrictions on payments with Russian clients in certain foreign currencies as of Sep 1, except “whitelisted” clients.
Reuters could not establish which white list the ECB was referring to, and whether UniCredit has complied with its requests.
Delicate balance
The lender said in July that it aimed to reduce cross-border payments to below 8.5 billion euros (S$12.1 billion) and local deposits under two billion euros by 2025.
It had approached Abu Dhabi’s Mubadala Investment over a year ago to explore a sale of its Russian business, said a person with knowledge of the matter, but the US$302 billion fund did not pursue it.
A spokesperson for UniCredit did not immediately comment. Bloomberg News earlier reported UniCredit’s approach to Mubadala.
“UniCredit is in a difficult position,” said Laura Brank, partner at law firm Dechert, who has been advising Western companies including banks on the sale of their Russian subsidiaries.
“It’s a very delicate balance, the idea of slowly winding down the business is probably the easiest thing to do right now, as opposed to just exit.”
The legal battle with the regulator comes as UniCredit seeks ECB’s approval to increase its stake in Germany’s Commerzbank.
While the central bank has talked favourably about bank mergers in Europe, the Italian bank is facing hurdles in Germany, Reuters reported.
ECB assesses purchases of bank stakes based on a handful of criteria such as the financial strength of the buyer and the reputation of the proposed acquirer, including court proceedings.
The regulator will also scrutinise whether the purchase increases risk of money laundering and financing terrorism, as expected under the central bank’s guidelines.
UniCredit’s ties to Russia date back to International Moscow Bank, the first Russian lender to raise funds from foreign banking institutions.
Following changes in ownership, it was renamed UniCredit Bank, and in 2015, was included in the list of systemically important banks by the Bank of Russia.
When Russia invaded Ukraine in 2022, UniCredit remained in Russia, being one of two European banks – along with Austria’s Raiffeisen – to maintain large operations in the country. REUTERS
