| VIENNA/BRUSSELS, July 30
VIENNA/BRUSSELS, July 30 Russian bank
subsidiaries based in the European Union will be exempt from EU
economic sanctions designed to choke off finance for big
state-owned Russian lenders, sources familiar with the
discussions told Reuters on Wednesday.
These sources said the exemption, which EU officials said
they would monitor closely to avoid abuse, meant Sberbank
and VTB subsidiaries could operate normally
within EU member states.
The step will come as a relief to Austria, where the two big
state-controlled Russian lenders have the headquarters of their
European operations, the sources said.
Hungary and Slovakia had also said the latest sanctions -
aimed at punishing Moscow for fomenting Ukraine's political
crisis - should not apply to Russian banks operating in the EU
to prevent disruptions on their retail operations, two sources
close to the discussions told Reuters.
Details of the EU sanctions - which include banning
state-controlled Russian banks from raising long-term financing
by selling stock or bonds on EU markets - are due to be
published on Thursday and enter into force on Friday.
The European Commission has not yet published a list of the
Russian banks that will be affected but has said it will apply
only to Russian banks that are more that 50 percent owned by the
state or other public authorities.
Sberbank is majority-owned by the Russian central bank, and
VTB is majority-owned by the government.
"We limited the geographical scope to Russia. We did not
want to include EU subsidiaries registered and established in
the EU," one EU source said, seeing as the risk as "manageable"
that these local lenders could transfer cash to their parents.
"These subsidiaries never issued corporate bonds or equities
in the past three or four years, so it will be extremely visible
if they start doing it now," the official said.
BANK RUN RISK
Sberbank Europe operates across central and eastern Europe
after buying Austrian Volksbanken's VBI eastern European arm in
2012, and VTB Bank (Austria) has operations in Germany and
France as well.
"When our bank supervisors looked into this they said:
'Listen, guys, what you do not want is to create a bank run,'"
one government official said on condition he not be named.
He dismissed the suggestion that the move was an attempt to
head off retaliation by Moscow against Austrian banks active in
Russia such as Raiffeisen Bank International.
An EU sanctions committee will review how the system is
functioning and ensure that EU-based subsidiaries are not
funnelling funds they raise back to their parents. "We are not
blind and deaf and stupid," the government official said.
Loans, including syndicated loans, are not covered by the
sanctions but European banks will probably be reluctant to
arrange lending to Russian borrowers.
Sberbank Europe and VTB Bank (Austria) declined comment.
VTB, which will also be hit by U.S. sanctions that thwart
its ability to access dollar financing, said earlier it was
ready to borrow in other currencies and markets.
(Additional reporting by Martin Santa, Tom Koerkemeier and
Justyna Pawlak. Editing by Jane Merriman)