* Gazprombank moved $6.9 billion to central bank in March
* It and other banks cut deposits in foreign banks
* Moves coincided with Western sanctions, more threatened
By Jason Bush
MOSCOW, April 24 Russia's third biggest bank
moved almost $7 billion to the central bank as tension over
Ukraine rose in March and joined others in slashing its deposits
in foreign banks where they could be frozen if more
international sanctions are imposed.
The movement of funds by Gazprombank, revealed in data
published by the central bank, means that at the beginning of
April its foreign currency on deposit at the central bank
dwarfed those of other major Russian banks.
It was "quite a unique event", Maxim Osadchy, banking
analyst at Moscow-based BKF Bank, said, noting Gazprombank
hardly ever used that account for foreign currency operations.
"This could show that Gazprombank was using the foreign
currency correspondent account at the central bank as a sort of
haven from sanctions."
Gazprombank declined to comment.
The currency move was part of wider actions by Russian banks
to repatriate funds to Russia, lowering their exposure to the
risks of possible wider Western sanctions over the Ukraine
crisis, analysts said.
Monthly accounts available on the central bank website show
that during March, Gazprombank increased the foreign currency
held at its correspondent account with the central bank from
zero to 248 billion roubles ($6.9 billion).
This represented the bulk of the $8 billion that Russian
banks added to such central bank accounts as a whole,
Raiffeisenbank analysts calculated.
It was not clear where other banks put their money or why
they did not use their central bank accounts. Banks' total forex
investments at home and abroad fell by around $24.5 billion,
central bank data shows, suggesting that much of the funds went
to meet large public demand for dollars and euros.
Only one Russian bank has so far been targeted by U.S.
sanctions, but some U.S. senators have recently called for
sanctions against both state gas producer Gazprom, the
bank's founder and minority shareholder, and other major banks.
The U.S. government has warned that more sanctions may
follow within days if Russia does not take steps to defuse the
situation in eastern Ukraine.
The accounting data show that from the beginning of 2007
until last month Gazprombank had only used the central bank
account for significant forex operations at the height of the
global financial crisis from January to March 2009.
At that time it deposited 90 billion roubles in foreign
currency for a short period. Between September 2009 and January
2010, two deposits worth just 1,000 roubles each were paid back
a month later.
During March, Gazprombank also greatly reduced its foreign
currency holdings at foreign banks - part of an inflow of funds
into Russia that has been masked by massive net capital outflows
Funds held by Gazprombank in correspondent accounts with
foreign banks fell to 118 billion roubles from 181 billion,
while up to three month deposits and loans with foreign banks
were slashed to zero from 183 billion roubles.
Other Russian banks also reduced their funds held at foreign
banks in March, although there was not an equivalent increase in
money they held at the central bank. In total Russian banks cut
the foreign currency they held in foreign banks to $79 billion
from $100 billion, central bank data showed.
"It's possibly a defence against possible sanctions," said
Anastasia Baikova, head analyst at Raiffeisenbank in Moscow.
VTB, Russia's second largest bank, saw the biggest
reduction, reducing its forex investments and accounts in
foreign banks by some 240 billion roubles.
VTB press office said the bank does not comment on its
monthly accounting data, calling the local standards used to
prepare it "unrepresentative" as they do not reflect all the
bank's foreign subsidiaries.
Sberbank, the largest bank, saw a relatively modest
reduction of 25 billion roubles.
The United States and European Union have imposed sanctions
on several Russian and Ukrainian individuals and Washington has
also sanctioned Bank Rossiya, owned by businessmen it regards as
close to Russian President Vladimir Putin.
"Considering the continuing instability in Ukraine (as a
consequence, the risk of tougher U.S. and EU sanctions,
including against Russian banks), we don't exclude that the
transfer of funds out of non-resident banks will continue,"
Raiffeisenbank said in a report analysing the data.
Gazprombank, with around 3.9 trillion roubles in assets, is
49.6 percent owned by Gazfond, a pension fund affiliated with
Gazprom, 35.5 percent owned by Gazprom itself, and 10.2 percent
owned by state development bank VEB.
Bank Rossiya until recently had links to Gazprombank, as the
asset management company that managed Gazfond was partly owned
by an insurance company, SOGAZ, owned by Bank Rossiya.
SOGAZ sold its remaining 35-percent shareholding in the
asset management company to Gazfond last month.
(Editing by Philippa Fletcher)