ECB Pressures Banks to Speed Up Russia Exits

The logo of Raiffeisen Bank International (RBI) is seen on their headquarters in Vienna, Austria, March 14, 2023. REUTERS/Leonhard Foeger/File Photo
The logo of Raiffeisen Bank International (RBI) is seen on their headquarters in Vienna, Austria, March 14, 2023. REUTERS/Leonhard Foeger/File Photo
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ECB Pressures Banks to Speed Up Russia Exits

The logo of Raiffeisen Bank International (RBI) is seen on their headquarters in Vienna, Austria, March 14, 2023. REUTERS/Leonhard Foeger/File Photo
The logo of Raiffeisen Bank International (RBI) is seen on their headquarters in Vienna, Austria, March 14, 2023. REUTERS/Leonhard Foeger/File Photo

The European Central Bank has told all Eurozone lenders with operations in Russia to speed up their withdrawal plans because of fears they could be hit by US punitive measures.

The ECB has written to lenders in recent weeks asking for detailed plans on their exit strategies, according to several people with knowledge of the communication, the Financial Times wrote.

Lenders need to provide the regulator with an “action plan” for their Russian business as early as June, some of the people said.

Last week, Austria’s Raiffeisen Bank International was forced to abandon a deal to swap assets in Russia for ones in Europe after pressure from US authorities.

The US intervention has led to concern at the ECB that RBI and other lenders could be targeted in future crackdowns.

“This could lead to serious damage to the banking system if the US authorities take sanctions,” said a person briefed on the ECB’s position.

The letters underline the increasing pressure from Washington over European groups that might support Russia’s war in Ukraine more than two years after the invasion.

“The ECB’s response to the US interventions shows the big dependency of Europe on the US,” said an adviser to the banks with Russian subsidiaries.

“We are more followers than leaders on judgments involving European companies.”

The US Treasury did not immediately respond to a request for comment.

The person briefed on the ECB’s position said supervisors there wanted to avoid European banks facing a similar fate as ABLV, a Latvian bank that was shut down after the US Treasury department accused it of “institutionalized money laundering” as well as breaches of North Korean sanctions and cut off its access to the US financial system in 2018.

The central bank has been calling on Eurozone banks to look for an exit from Russia since Moscow launched its full-scale invasion of Ukraine in February 2022.

At one extreme, RBI, which has the biggest exposure to Russia among the European lenders, has been told to reduce its lending in the country by two-thirds from its current level by 2026.

The bank, which faces potential fines by the ECB if it fails to comply, has already shrunk its Russian loan book by 56% since the war began.

Meanwhile, other banks including Italy’s UniCredit — the lender with the second-biggest exposure — have been asked to provide the ECB with a detailed breakdown of their plans for their operations. UniCredit has been given a deadline of June 1 to respond.

Last Thursday, a Russian court ordered that UniCredit's assets, accounts and property, as well as shares in two subsidiaries, be seized as part of a lawsuit over an aborted gas project involving the Italian bank, court documents showed.
UniCredit and OTP — the Hungarian bank that is not under direct supervision of the ECB — have in the past year started to repatriate profits from their Russian subsidiaries in the form of quarterly dividend payments.



Saudi Crown Prince Announces 'King Salman Automotive Cluster' in KAEC

Saudi Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud. Asharq Al-Awsat
Saudi Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud. Asharq Al-Awsat
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Saudi Crown Prince Announces 'King Salman Automotive Cluster' in KAEC

Saudi Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud. Asharq Al-Awsat
Saudi Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud. Asharq Al-Awsat

Prince Mohammed bin Salman bin Abdulaziz Al Saud, Saudi Crown Prince and Prime Minister, has designated “King Salman Automotive Cluster" as the official name of the cluster for automotive manufacturing activities, located within King Abdullah Economic City (KAEC).
The hub will be a crucial step in Saudi Arabia’s economic diversification and will be an enabler for the automotive sector and sustainable transportation, contributing to raising non-oil GDP and increasing exports. The cluster enhances the automotive sector in Saudi Arabia by accelerating the growth of local capacity in manufacturing and sector-related research and development, and by making supply chains to serve regional and international markets more efficient.
King Salman Automotive Cluster will be a major center for the automotive sector and will have headquarters and factories for local and international companies. Notable companies include Ceer, the first Saudi electric car brand, and Lucid Motors, which opened its first international factory in KAEC in 2023. It will also host several PIF joint projects with global manufacturers, including Hyundai Motor – establishing a highly automated factory for manufacturing cars in Saudi Arabia – and a joint venture agreement with Pirelli to establish a tire factory locally.
The cluster aims to create optimal investment opportunities for the private sector to develop promising sectors in Saudi Arabia. It is expected that the cumulative GDP contribution from companies operating in King Salman Automotive Cluster will reach approximately SAR 92 billion by 2035. The cluster will also contribute to the creation of many direct and indirect jobs, support the local manufacturing sector, and increase Saudi exports to regional and global markets, which will positively impact the national balance of payments.
King Salman Automotive Cluster will leverage the supportive environment and investment incentives provided by KAEC, including its logistical infrastructure, and its proximity to a highly developed port in a vital location for global trade. These factors will provide opportunities for the local private sector and international companies to engage as partners, suppliers, and investors in the automotive sector and its related services.
The new King Salman Automotive Cluster will contribute to achieving Saudi Vision 2030, which aims to diversify the economy and achieve sustainable growth. The cluster will also be a major contributor to fulfilling the aims of the National Industrial Development and Logistics Program, which seeks to position Saudi Arabia as a leading industrial nation and a global logistics center by developing high-growth sectors locally and attracting foreign investment. This is in addition to supporting the objectives of national strategies for industry, transport and logistics.
Automotive and mobility is one of PIF’s strategic investment sectors, highlighted by partnerships with the private sector. PIF’s portfolio has several investments with the aim of enhancing the industry’s infrastructure and developing the sector’s local supply chain capacity. PIF is also contributing to enhancing local expertise and technology through joint ventures with major international manufacturers.