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Italian financial institution UniCredit has filed a authorized problem questioning a European Central Financial institution order to cut back its operations in Russia.
UniCredit, which has the second-biggest publicity to Russia amongst western banks, was one in every of a number of Eurozone lenders to obtain a letter from the ECB in Might, ordering them to hurry up their withdrawal from the nation.
On Monday, UniCredit mentioned it had utilized to the EU’s Normal Courtroom to hunt clarification on the ECB request. It added that it had requested to be allowed to not adjust to the request whereas its software was being heard.
UniCredit mentioned it had “issues in regards to the phrases [of the ECB’s request that went] . . . past the present authorized framework”.
An individual with information of the financial institution’s view mentioned that whereas UniCredit was not making an attempt to keep away from complying with the ECB request, it wished to ensure that in doing so it was not breaking sanction guidelines or legal guidelines in international locations, together with in Russia.
The ECB declined to remark.
Since Russia’s invasion of Ukraine two years in the past, Western banks have come below stress from politicians and regulators to drag overseas. Whereas banks akin to France’s Société Générale have left, taking a big monetary hit, a handful have stayed within the nation and argued they’re winding down their operations.
Asserting its authorized problem on Monday, UniCredit mentioned it had lowered its cross-border publicity to Russia by 91 per cent and its home publicity by 65 per cent since February 2022.
Whereas the Russian enterprise has been more and more remoted from the mother or father firm over the previous two years, UniCredit restarted repatriating earnings from the subsidiary final yr.
So as to take action, UniCredit was required to make a request to Russian authorities, which allowed the fee of as much as half of its subsidiary’s internet earnings, so long as it paid native taxes. Final yr, UniCredit acquired €137mn from its Russian subsidiary.
The ECB made the request to Eurozone banks to hurry up their exits due to worries they could possibly be hit by punitive measures from US regulators, which have taken a harder line on Western firms nonetheless working in Russia, the Monetary Occasions reported on the time.
The choice to inform banks to reduce their actions in Russia was taken by the ECB’s supervisory board, which oversees the EU’s greatest lenders. If banks refuse to conform, they’ll in an excessive situation be stripped of their licence below EU regulation.
UniCredit mentioned on Monday that it had knowledgeable the ECB of its authorized problem.
“Unprecedented circumstances, the complexities inherent within the geopolitical and financial situation and the shortage of a harmonised regulatory framework relevant to it and the potential for critical unintended penalties of implementing the choice that may impression not solely the Russian subsidiaries however UniCredit, compel the board of administrators of UniCredit to hunt . . . readability and certainty,” the financial institution mentioned.
In an interview with the FT printed final month, UniCredit chief govt Andrea Orcel mentioned: “Promoting or extracting your self from Russia by promoting your financial institution or by discovering different schemes is extraordinarily difficult as a result of it’s worthwhile to slot in an ever-diminishing gray space the place you match the political will and keep away from the sanctions of either side.
“It doesn’t imply we cease making an attempt. We’re continuously options, however the possibilities are low.”
UniCredit has additionally been hit by a St Petersburg court docket ordering the seizure of €463mn of property from its Russian enterprise, following a dispute with Gazprom subsidiary RusChemAlliance.
