Following the shareholders’ meeting, Raiffeisen Bank International RBI decided to scale back its operations in Russia and remove the Russian subsidiary from the group either by selling it or withdrawing it from the banking network, according to Der Standard. RBI chief Johann Strobl provided the explanation through the bank’s press office.
“The RBI Group will pursue transactions aimed at selling or splitting Raiffeisenbank Russia and withdrawing Raiffeisenbank Russia from the Group. We are committed to further reducing commercial activity in Russia,” he stated.
The press service noted that the reduction in the Group’s activity will involve lower lending volumes and fewer foreign exchange transactions in Russia, which will affect RBI’s payments business. Some banking operations in the country will continue under the existing banking license to support customers affected by the shift in RBI’s Russia footprint.
Market conditions in Russia are challenging, and local plus international laws governing asset sales are subject to frequent changes.
RBI organizations in Russia employ more than 9,000 people, and the company said it would take care of its employees.
Raiffeisen Bank stands as one of the oldest in Russia’s modern era and was the first European bank in Moscow to serve corporate clients in 1996 and individual clients in 1999. It has been a major European banking presence in Russia, accounting for about a quarter of euro transfers in the country. In 2022, RBI’s net profit in the Russian market reached around EUR 2 billion, roughly half of the group’s pre tax earnings.
The primary reason cited for abandoning Russian assets, as well as the volatility in legislation, is linked to Russia’s military actions in Ukraine. Earlier, the US Treasury asked RBI to clarify its payments business and related processes in light of developments in Russia and Ukraine. Analysts and Austrian officials noted that these checks do not amount to direct sanctions or fines.
As early as March 24, the European Central Bank urged the banking group to close its operations in Russia. The ECB did not demand immediate exit but requested a clear plan to withdraw. Separately, the National Agency for the Prevention of Corruption flagged Raiffeisen Bank as a sponsor tied to the war by the actions of DPR and LPR and alleged advantageous loan terms to the Russian military.
There is a nuance
Because Austria is considered a non hostile country by Russia, RBI might be asked to make a voluntary contribution to the Russian budget in connection with asset sales.
On December 21, 2022, a ministry subcommittee defined criteria to guide approvals for asset sales by foreign companies from non friendly countries. One option allows installments or a voluntary contribution to the federal budget.
The committee outlined four criteria used in decisions about such foreign sales: the existence of an independent asset valuation; availability of one or two annual installments or a voluntary budget contribution of at least 10 percent; sale at a discount of at least 50 percent of the independent value; and the creation of performance indicators for new shareholders.
On March 27, the Ministry of Finance adjusted the voluntary contribution from 5 to 10 percent of the market value for sales where the discount is under 90 percent. The subcommittee thus stated it would act as appropriate when approving these sales conditions.
It remains unclear who ultimately pays the fee, as the Ministry of Finance did not specify. On December 30, 2022, the subcommittee officially set the maximum market value reduction for assets held by non residents deemed hostile at 50 percent.