By Alexandra Schwarz-Goerlich and John O’Donnell
VIENNA/FRANKFURT (Reuters) – Raiffeisen Bank International (RBI) is stepping up moves to hand its money-spinning Russian arm to shareholders, three people familiar with the matter said, amid mounting pressure to cut its ties to Moscow.
Austria’s second-largest bank is making preparations for a spin-off after months of unsuccessfully trying to find a buyer to defuse a row over its Russian business, in order to avoid having to unwind it entirely.
But the last-ditch attempt faces hurdles, not least from international regulators, the people told Reuters.
Raiffeisen is now the most important Western bank in Russia, offering a payments lifeline to Russians with few alternatives as Moscow is increasingly isolated over its invasion of Ukraine.
A spokesperson said Raiffeisen would “continue to progress potential transactions which would result in the sale or spin-off of Raiffeisenbank Russia”.
While a spin-off has wide support among Austrian authorities, it faces hurdles, including securing European Central Bank (ECB) approval, as well as the blessing of Washington, which is probing RBI’s Russia links.
If the spin-off proceeds, it could make RBI’s owners, led by Austrian community banks, shareholders in a new Vienna-listed entity, with one share for each they now own.
It remains unclear whether the entity would be truly independent of RBI, a decisive factor for whether it should be supervised by Austria or the ECB.
One person said that a spin-off was seen as better than a sale, while a second familiar with ECB thinking said that the degree to which the spun-off bank was independent of RBI would determine whether the central bank would oversee it.
If there are wide overlaps in staff or funding, the person added, it could be put under the ECB’s watch, as part of RBI.
The ECB declined to comment.
A third person said a spin-off was more likely because any potential buyer had been scared off by Western sanctions.
A fourth person said a spin-off would allow Austrian cooperative banks uneasy with Russia ties to sell out. He said that U.S. authorities had, however, expressed concerns about how the new entity would be monitored for money laundering.
The plan is designed to distance RBI from Russia, but it would not be a clean cut. RBI said that while it had reduced some Russian activities, it had an obligation to preserve operations there to support customers and its 9,000 staff.
Raiffeisen is under pressure after it emerged that it was one of the banks obliged to take part in a Russian scheme to grant loan payment holidays to troops fighting in Ukraine.
In January, the U.S. sanctions authority launched an inquiry into Raiffeisen over its Russia business and the ECB is also pressing Raiffeisen to unwind it.
The U.S. inquiry in particular could prove perilous for Austria, which had modelled itself as a bridge between east and west, turning Vienna into a magnet for Russian money.
The spin-off is designed to maintain Vienna’s banking ties with Russia, while insulating Raiffeisen from the reputational fallout of war in Ukraine.
Austria’s Alexander Schallenberg on Monday again defended the bank, an Austrian official said.
Schallenberg told fellow foreign ministers that Raiffeisen should not be singled out because it was no different to most Western companies continuing to work in Russia.
Last October, Raiffeisen said it had loaned more than 600 million euros to customers, mainly in Russia and Belarus, who have since been sanctioned. That amount has since fallen.
A Ukraine-sponsored sanctions tracking project included Raiffeisen on a list of sponsors of war for cooperating with Russia.
(Additional reporting by Francesco Canepa in Frankfurt; Writing by John O’Donnell; Editing by Alexander Smith)