The largest exposure of any European institution to Russia, where it operates a top-15 bank, is UniCredit, after Raiffeisen of Austria.
In addition to demanding a decision from the EU’s General Court and a temporary suspension of the request, UniCredit announced on Monday that it was contesting the conditions established by the ECB for the Italian bank to reduce its exposure to Russia.
In recent weeks, the regulators of the European Monetary Union (EU) and US authorities have increased their pressure on banks in the euro zone that are still doing business with Russia, more than two years after Moscow invaded Ukraine, because of their connections to Russia.
The Italian group’s retail bank in Russia is subject to local laws and complex regulatory frameworks. As a result, UniCredit said in a statement that it was necessary to “seek clarity and certainty” regarding the necessary actions.
According to UniCredit, the application process might take several months, and the judgment on its request for suspension will come in the near future. The company stated that this was required to prevent any “serious unintended consequences” from the ECB decision.
Antonio Tajani, the foreign minister of Italy, acknowledged the grievance and stated that he too needed clarification.
“The ECB must take into account the situation in which Italian companies operate in Russia, in compliance with EU sanctions. Hasty decisions merely risk damaging Italian and EU companies,” he stated.
European lenders have been requested by the European Central Bank to submit a “clear roadmap” for leaving the Russian market. Fabio Panetta, the governor of the Bank of Italy and an ECB policymaker, advised Italian banks “to get out” in May due to reputational concerns.
According to UniCredit, its efforts to reduce its business in Russia have shown that it is “fully aligned with ECB on the importance of reducing its presence in Russia.”
However, there are “concerns about the terms upon which this reduction has to take place as provided for in the decision issued by ECB, that goes beyond the current legal framework.” The ECB refused to comment on the matter.
The largest exposure of any European institution to Russia, where it operates a top-15 bank, is UniCredit, after Raiffeisen of Austria.
A representative for Raiffeisen told Reuters on Monday that the company has no intentions to sue the ECB over the request to scale back its operations in Russia.
“For anyone who believes that Ukraine’s fight against Russia is important for the security of Europe, the fact that UniCredit stayed in Russia, made profits, and is now suing the ECB over their attempts to get it to leave, this doesn’t look good,” Nicolas Veron of Breugel, a Brussels-based think-tank said.
UniCredit has already reduced its exposure to Russia on a cross-border basis by 91% and locally by 65%, and “further substantial reductions” are anticipated.
The United States has also been putting pressure on European banks that are still operating in Russia.
In May, Treasury Secretary Janet Yellen told Reuters that the bankers were facing “an awful lot of risk” and that Washington was considering tougher secondary penalties against banks that were discovered to be supporting transactions related to Russia’s military campaign.
European banks’ attempts to exit the market have been hampered by Western sanctions, which have reduced the pool of possible purchasers. A departure is currently subject to President Vladimir Putin’s consent due to limitations imposed by Moscow.
Additionally, approval from Russia’s central bank is required. The fact that another Italian banker, Intesa Sanpaolo, has not yet completed its exodus from Russia even after obtaining the presidential decree allowing it to do so last September, serves as a stark reminder of the challenges.