* ECB to control borrowing requests from Russian banks
* Decision follows European sanctions against Moscow
* ECB wants to avoid circumvention of sanctions
By Eva Taylor
FRANKFURT, Aug 7 The European Central Bank is
tightening the leash on euro zone subsidiaries of major Russian
banks by taking control over how much they can borrow from it
following European sanctions against Moscow.
Reuters reported on Wednesday that Russian banks' euro zone
subsidiaries could face caps or even exclusion from borrowing
from the ECB as the central bank examined how the sanctions
affected its operations.
Being able to tap central bank refinancing operations is
crucial for banks, especially when others may not be willing to
lend to them.
Until now, the euro zone subsidiaries of the affected
Russian banks had unlimited access to the ECB's refinancing
operations, like other euro zone banks, but the ECB kept an eye
on their capital flows to ensure they did not funnel money they
borrow from the central bank back to Russia.
On Thursday, however, ECB President Mario Draghi said the
central bank had decided to go a step further.
"These banks will have access to refinancing, but they will
be asked to announce their requirements first, and second,
approval will be granted if it has been confirmed that the
requested liquidity will not be used to circumvent EU
restrictive measures," Draghi told a news conference.
"So banks will have to explain why they need the money, and
the national central banks' inspectors, supervisors will assess
The ECB's decision shows how difficult it has become for the
central bank to keep out of politics given the depth and
complexity of financial interconnections and at a time when it
is taking on more responsibility to restore Europe to growth.
Among the banks in question are the Austrian arms of
Russia's two largest banks, Sberbank and VTB Bank, which the ECB
consider so significant it has decided to supervise them
directly when it takes on banking oversight in the euro zone in
(Reporting by Eva Taylor; Editing by Ruth Pitchford)