Russian banks face pressure to overhaul European divisions

VTB shrinks operations to avoid ECB list of ‘significant institutions’

Russian banks are being driven to restructure their European operations to avoid being classed as “significant institutions” by regulators in Frankfurt, a status that has irritated executives in Moscow by increasing their capital requirements.

Andrei Kostin, chief executive of VTB, said the Russian state-controlled bank planned to close its French operation and to shift its European headquarters from Vienna to Frankfurt by folding its two subsidiaries in those cities into one.

The move, which will also cut costs, is designed to remove VTB from the European Central Bank’s list of the continent’s 125 most significant institutions that it oversees and subjects to regular stress tests. As well as a bank’s size, the ECB also considers how interconnected it is when judging its significance. VTB has 60 staff in France and more than 240 in Germany and Austria.

“In Europe we definitely have a cutting expenses operation because we have three banks, small banks in Germany, Vienna and France,” Mr Kostin told the Financial Times in an interview last month.

“There are three licences,” he said. “We [have] now agreed with the ECB there will be one licence for all the banks, which helps us to be excluded from the [list of] systemically important banks. We are shrinking in Europe.”..............

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