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Sanctions against Russian banks have psychological rather than material effect — experts

Experts say the new sanctions are softer than expected, but the situation might deteriorate any time soon
Deputy Chairman of the Duma committee for financial market Anatoly Aksakov  ITAR-TASS/Valery sharifulin
Deputy Chairman of the Duma committee for financial market Anatoly Aksakov
© ITAR-TASS/Valery sharifulin

MOSCOW, July 17. /ITAR-TASS/. The third round of US sanctions targeting Vnesheconombank (VEB) and Gazprombank has psychological rather than financial effect, Deputy Chairman of the Duma committee for financial market Anatoly Aksakov says. Director of the Higher School of Economics (HSE) Banking Institute Vasily Solodkov shares the view - the new sanctions are softer than expected, but the situation might deteriorate any time soon should Europe and the international payment systems be involved.

“These sanctions mainly create problems for attracting lending from abroad. VEB and Gazprombank were ready for this, since the Central Bank and the government based their plans on much tougher scenarios,” Aksakov told ITAR-TASS. “I think the sanctions will not considerably affect either these organizations’ operations or the financial system stability as a whole. I am calm about the situation, and I am not dramatizing. These US actions cause rather psychological than material damage.”

VEB will not feel any effects on its capital, the expert believes, as it has been recently decided to convert the National Wealth Fund deposits into the bank’s capital, so the bank has sources to substitute foreign funding.

HSE's Solodkov also believes the limitations on use of foreign liquidity pose no threat to VEB since this state corporation is not a classical credit organization and receives funds not from the market, but from the government.

“The situation is more complicated with Gazprombank,” the expert said. “Though a state bank, it has a considerable private capital stake.” However, at this stage, the situation was not critical, he added. Besides, the bank has succeeded to attract foreign funding in time.

Late in June, Gazprombank received €1 billion at 4% per annum in the foreign market, having sold bonds on the Irish Stock Exchange. The offering was managed by Credit Suisse, Deutsche Bank, GPB-Financial Services and SG CIB. Gazprombank raised funds abroad more frequently than any other Russian financial company. The bank has 78 Eurobond issues on the market denominated in dollars, Swiss francs, euros, rubles and yuans.

“The US debt market is now closed for Gazprombank, and I think the European market will be closed soon,” Solodkov said. Visa and MasterCard disconnection is unlikely but possible, the expert believes.

 

Third round of US sanctions vs Russia

The third package of US sanctions vs Russia adopted earlier on Thursday imposes limitations on economic sectors. The blacklist newcomers are VEB, Gazprombank, Rosneft oil and gas company, Kalashnikov weapon consortium, Uralvagonzavod mechanical engineering company, Novatek natural gas company and others.

In contrast to the first two waves of anti-banking sanctions against Rossiya, Sobinbank, SMP Bank and Investcapitalbank, Gazprombank and VEB have been prohibited from raising foreign funds for more than 90 days. According to a source in the US administration, these measures close access for the banks to medium-and long-term financing in the US.

Rumors about possible sanctions against the two banks emerged in April. The banks’ preparations were reported by Bloomberg with a reference to sources close to the discussion of the issue.

A source in Gazprombank confirmed to ITAR-TASS the bank had been preparing for the situation long before the sanctions. According to the bank’s statements, it boosted its correspondent accounts with the Central Bank, while reducing funds in non-resident banks and assets in foreign currency.

“Certain sanctions were implemented by EU and USA against Russian officials and businessmen. The impact on the condensed consolidated interim financial information of future instability in Ukraine, should it continue, and/or additional sanctions against Russia, if they were to be implemented, is at this stage difficult to determine,” said the bank’s statements for the first quarter of 2014.