Russian Court Freeze Prevents Sale of Raiffeisen Bank's Local Arm

A Russian court has frozen the shares of Raiffeisen Bank International's local arm, halting any potential sale. The move, amid the ongoing Russia-Ukraine conflict, complicates international payment channels. Although operations remain unaffected, the European Central Bank pressures the bank to scale down its Russian business.

A Russian court has frozen shares in Raiffeisen Bank International's (RBI) local division, the largest Western bank in Russia, effectively ruling out any sale of the business, the bank announced on Thursday.

Austria-based RBI had intended to spin off its Russian operations, which are vital for facilitating payments for hundreds of companies, due to increasing pressure from international regulators. However, following more than two years of conflict between Russia and Ukraine, little progress has been made on this front. This move signifies one of the biggest freezes involving a Western bank in Russia and escalates the already tense situation between Moscow and the West.

A spokesperson for RBI clarified that despite the court's decision ruling out the sale, the bank's operations in Russia would remain unaffected. Furthermore, efforts dictated by the European Central Bank to downsize its Russian operations would continue. The spokesperson reiterated, "We can still appoint management and give instructions to the Russians but we cannot sell the bank." RBI intends to contest the court's ruling.

One source informed Reuters that Russian authorities had explicitly communicated to RBI their preference for the bank to remain operational, citing its role in enabling international payments for its 2,600 corporate clients, 4 million local account holders, and 10,000 staff.

RBI is a significant financial entity in Austria and eastern Europe, managing 18 million customers from Vienna to Moscow, with 44,000 employees. The bank has become more profitable since the start of the Ukraine war in 2022, contributing to about half of the group's profits in the year's first quarter due to increased fees on overseas payments.

(With inputs from agencies.)