* RTS, MICEX cut losses after EU sanctions proposal
* Banks underperform
* Markets awaits Friday's rate decision (Adds latest prices, comment)
By Lidia Kelly
MOSCOW, July 24 Russian assets trimmed their losses after the European Union disclosed details of possible new sanctions on Moscow for its involvement in Ukraine, with analysts saying implementation of the measures was not guaranteed.
At 1425 GMT, the dollar-denominated RTS index was down 0.7 percent at 1,263 points after losing as much as 1.5 percent earlier in the trading session.
The rouble-traded MICEX was unchanged at 1,405 points, recovering from a 0.5 percent decline at the opening.
The EU said on Thursday it would target state-owned Russian banks and their ability to finance Moscow's faltering economy in its most serious sanctions so far over the Ukraine crisis, under proposals considered by EU governments.
"Probably market players keep in mind that for the implementation of such a serious package of measures, the unanimous approval of all member states of the European Union is necessary," Sofia Kirsanova, an analyst at Raiffeisen Capital in Moscow, said in a note.
"In practice, it is difficult to achieve."
However, the financial subindex on MICEX, a market capitalisation-weighted price index of Russia's top-tier and most liquid financial stocks, underperformed, trading down 2.6 percent.
Sberbank, Russia's largest bank, was 1.1 percent lower and VTB, the second biggest lender by assets, traded down 0.9 percent.
Investors are nervous about Friday's central bank rate meeting. Although most expect already high interest rates to remain on hold to counter inflation, the central bank has surprised the market already this year.
"Although the macroeconomic picture has not altered materially enough since the last meeting to push the central bank out of its wait-and-see stance, the re-escalation of geopolitical tensions has raised concerns about the possibility of additional tightening," VTB Capital analysts wrote in a note.
"Relatively mild market pressure on the rouble, however, suggests that the central bank would be well-advised just to talk the talk and save the little policy powder it has left in its stores."
The rouble was 0.5 percent weaker against the dollar at 35.06 after opening the session down 0.7 percent versus the greenback.
The Russian currency traded 0.6 percent lower at 47.22 versus the euro <EURRUBTN=MCX.
This has left the currency nearly 0.5 percent weaker at 40.53 against the dollar-euro basket the central bank uses to gauge the rouble's nominal exchange rate.
Russian sovereign debt insurance costs rose on Thursday and dollar bonds fell after the EU's new sanctions proposal.
Credit default swaps (CDS) used to insure against default or debt restructuring rose 17 basis points after opening the session at a one-week low of 197 bps, Markit data showed.
Russian yield spreads over U.S. Treasuries widened 5 bps on the EMBI Global index 11EML to 280 bps, lagging the index which saw average spreads tighten 3 bps.
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Russia in graphics: link.reuters.com/dun63s (Writing by Lidia Kelly; Additional reporting by Sujata Rao in London; Editing by Gareth Jones)