Ukraine eyes sanctions on subsidiary of Russia's Sberbank

A worker paints the facade of a branch of Sberbank in central Moscow, Russia, August 17, 2016. REUTERS/Sergei Karpukhin

KIEV (Reuters) - Ukraine’s central bank said on Tuesday it was likely to recommend the introduction of sanctions on the local subsidiary of Sberbank over the Russian lender’s decision to recognize passports issued by separatists in eastern Ukraine.

On Tuesday, Kremlin-owned Sberbank said it would comply with an order from President Vladimir Putin in February for Russian authorities to recognize identity documents issued in the separatist-held regions of Donetsk and Luhansk in east Ukraine.

“If this information is confirmed, the central bank will raise with the National Security and Defence Council the question of introducing sanctions on the subsidiary of Russia’s Sberbank in Ukraine,” the Ukrainian central bank said in a statement.

It did not say what form sanctions would take or if restrictions would be applied to other Kremlin-owned banks operating in Ukraine.

Five Russian state-owned banks are present in Ukraine, including three in the top 20, and they hold a combined market share of 8.6 percent.

The central bank has sought to cut that following a breakdown in bilateral relations in 2014 due to Moscow’s annexation of Crimea and support for the pro-Russian separatists.

Following Putin’s order, Sberbank said in emailed comments on Tuesday that it “is currently prepared to provide services in all affiliated branches to individuals with passports from the DNR and LNR,” referring to the so-called Donetsk and Luhansk separatist republics in eastern Ukraine.

It is not yet clear how the other Kremlin-owned banks operating in Ukraine are handling Putin’s order.

Reporting by Natalia Zinets; Additional reporting Alexander Winning in Moscow; Writing by Alessandra Prentice; editing by David Stamp