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Ukraine has imposed sanctions on five Russian-owned banks operating in the country after the Russian government forced their parent groups operating on the Russian market to accept clients using passports from the breakaway Donetsk and Lugansk “people’s republics”.

The sanctions were signed off on Thursday by Ukraine’s president Petro Poroshenko, who called upon the West to follow in his country’s footsteps by imposing “analogous” new sanctions against Russian banks engaged in such activities.

Proposed yesterday by the National Bank of Ukraine, the measures target two Ukrainian subsidiaries of both Sberbank and VTB; and Prominvestbank, which is owned by Russia’s State Corporation Bank for Development and Foreign Economic Affairs.

In an explanatory statement, Ukraine’s central bank said the sanctions ban capital outflows, prohibit financial transactions involving the transfer of funds to parent banks, including asset-related transactions, dividend or interest payments, repayment of loans or deposits from correspondent accounts, repayment of subordinated debt, profit distribution and allocation of capital.

Yakiv Smolii, first deputy head of Ukraine’s central bank, added in the statement:

The sanctions aim to protect the interests of these banks’ customers and prevent the outflow of capital from Ukraine. These sanctions will prevent Ukrainian banks with Russian state capital to siphon off funds abroad and transfer them to parent banks based in the Russian Federation.

Ukraine’s central bank added that the Russian state banks’ “subsidiaries operating in Ukraine targeted by sanctions have sufficient liquidity to meet their obligations to depositors.”

The new sanctions come amid fresh tensions between Russia and Ukraine, once friendly nations now in a quasi-state of war since Moscow’s 2014 annexation of Crimea and fomenting of a separatist conflict in far eastern regions.

Nationalists in Ukraine this week vandalised Russian bank branch offices in Kiev and other cities. On Wednesday, Kiev imposed a transportation cargo blockade on Russian-backed breakaway eastern enclaves after their militant leadership seized strategic factories.

Kiev is making clear that it expects the Russian banks to exit the Ukrainian market. Speaking to journalists on Wednesday, Kateryna Rozhkova, deputy head of Ukraine’s central bank, said:

We hope the potential exit of these banks will occur in a civilised manner: either through sale, or through gradual fulfilment of obligations to clients.

Copyright The Financial Times Limited 2017. All rights reserved.
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