* European Central Bank to supervise big banks from November
* Lenders under watch now include Russia's top two banks
* Twelve banks drop off ECB watch list, four go on
(Adds background, detail on ECB list)
By Eva Taylor, John O'Donnell and Alexander Hübner
FRANKFURT, June 27 The European Central Bank
will supervise and run health checks on the Austrian arms of
Russia's two largest banks, giving officials in Frankfurt
unprecedented control over their activities in Europe.
The ECB said on Friday that it had added Russia's biggest
bank, Sberbank, and second-largest, VTB Bank, to the 120-strong
list of lenders it will police. Their cross-border operations
are so significant they could create a risk for the euro zone,
the central bank said.
The ECB is preparing to supervise the euro zone's biggest
banks, a key part of a wider banking union. The system is
designed to keep tabs on banks and avert the kind of financial
crisis that shook the industrialised world in 2008.
Banking supervision will widen the central bank's reach, and
it may worry Moscow. The announcement came as European Union
leaders warned Russia they were ready to impose further
sanctions over Ukraine.
Sberbank is run by German Gref, an ally of President
Vladimir Putin, and VTB is majority-owned by Russia. Their
subsidiaries will both be subject to individual health checks by
the ECB next year, a spokeswoman said. VTB declined to comment
and Sberbank could not immediately be reached.
The move follows warnings by the ECB about the impact on
Europe from the crisis in Ukraine. In a recent report, ECB staff
cautioned that the main spillover in Europe would be through
"trade and financial linkages with Russia, rather than with
Russia has ties with many countries throughout Europe and
particularly with Austria. Vienna, positioned on the edge of the
Iron Curtain that divided Europe until the 1989, was a gateway
to the eastern bloc and became a base for doing business with
the former Warsaw Pact countries.
Russia is Austria's ninth-biggest trading partner.
The ECB will become the watchdog over big banks across the
18 countries in the euro zone this November. On Friday, the ECB
published a list of the top euro zone banks that it will police.
A final list will come out by Sept. 4.
It differs from an earlier list published last year of 128
banks that the ECB is putting through a health check. Twelve
banks dropped off that watch-list, among them three in Germany.
Those taken off include the German corporate financier IKB,
which was among the first big banking collapses during the
crisis. An export financing arm of German state bank KfW has
also been removed. Peugeot's car financer Banque PSA Finance in
France and DNB Bank in Estonia were removed as well.
The clearing houses LCH Clearnet in France and Clearstream
in Luxembourg were also taken off the list of institutions to be
Two other banks were added to the list along with the
Austrian subsidiaries of the Russian banks: Banque Degroof in
Belgium and Barclay's Italian subsidiary. Degroof will also be
put through a health check by the ECB next year.
"The ECB has been made much more powerful politically by the
fact that it has supervision," said Nicolas Veron of Brussels
think tank Bruegel. "It is just doing its job."
For the full document, click on: here
For the temporary list, that was published in October 2013,
click on: here
(Additional reporting by Alexander Huebner in Frankfurt, Megan
Davies and Alexander Winning in Moscow and Georgina Prodhan in
Vienna; Editing by Larry King)