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Raiffeisen Attempts Last-Ditch Russian Spin-Off

The increasing pressure to cut all ties with Moscow has finally boosted the efforts of Raiffeisen Bank International (RBI) to transfer its Russian arm to shareholders

Raiffeisen Attempts Last-Ditch Russian Spin-Off

Image: rbinternational.com

As reported by Reuters, Austria-based international baking conglomerate Raiffeisen Bank International (RBI) is preparing to hand its infamous but profitable Russian arm to shareholders, responding to the rising public pressure.

Despite a plethora of global businesses leaving Russia after its unprovoked invasion of Ukraine, Austria’s second-largest bank has remained on the list of companies still operating in Russia for more than a year of war.

Moreover, the pressure on the bank increased as it became known Reiffeisen was one of the banks obliged to take part in a Russian scheme to grant loan payment holidays to Russian occupant troops fighting in Ukraine. On this account, a Ukraine-sponsored sanctions tracking project included Raiffeisen on a list of war sponsors.

Although the banking giant had long declared it was going to exit the sanction-laden country, the decision was not yet implemented in reality. The bank reportedly spent months unsuccessfully trying to find a buyer for its Russian business. Reportedly, all potential buyers had been scared off by Western sanctions.

Despite all the legal and reputational implications, RBI tried to avoid unwinding the Moscow business entirely. By rough estimations, RBI’s assets in Russia amounted to €22,9 billion as of April 2022, which was almost 10% of the Group’s total assets. The Austrian bank has also been generating a third of its profits in the country. Besides, RBI claims it has an obligation to preserve operations there to support customers and its 9,000 staff.

Therefore, currently, the institution is actively making preparations for a spin-off, which means the Russian division would theoretically become an independent company through the sale or distribution of shares. However, in practice, it remains unclear whether the entity would be truly independent of RBI, and whether it would be supervised by Austria or the ECB.

Anyway, the last-ditch attempt faces obstacles from international regulators, including European Central Bank (ECB), said undisclosed people with knowledge of the matter. Besides, US authorities expressed concerns about how the new entity would be monitored for money laundering.

Firstly, if the spin-off proceeds, RBI’s owners, led by Austrian community banks, would become shareholders in a new Vienna-listed entity, with one share for each they now own. However, the degree to which the spun-off bank would be independent of RBI would determine whether the central bank would oversee it. If staff or funding largely overlaps, it could be put under the ECB’s watch, as part of RBI.

No official commentaries from ECB on the matter are yet available.

Nina Bobro

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