Some European banks are still making money in Russia. The EU is losing patience and pressuring them to exit the market ASAP.

• A top ECB official called on EU banks still operating in Russia to exit the market asap.
• His comments followed news that some Western firms are still operating in Russia, despite sweeping sanctions.
• The official flagged reputational risks to those who stay back.

The European Union is losing patience with the bloc’s banks still operating in Russia — and one top European Central Bank official is publicly putting pressure on lenders to exit the country.

“I think that it is important that banks remain very focused on reducing further their exposures and, ideally, exiting the market as soon as they can,” Andrea Enria, the ECB’s chief supervisor, said at the European Financials Conference on Tuesday, per an official transcript.

“That’s a process that we not only praise but strongly encourage banks to perform because there is a huge reputational risk in continuing to operate in Russia, in an economy that is shifting towards trying to limit the impact of sanctions and supporting the war effort,” Enria added.

It’s unclear how many Western banks are still doing business in Russia. The Financial Times reported in January that just a handful of the 45 Western banks with subsidiaries in Russia have managed to exit.

The ECB official’s comments followed headlines that some Western companies with businesses in Russia are still profitably operating in the country — even more than a year after Russia’s invasion of Ukraine triggered sweeping sanctions.

The top 100 Western companies that remained in Russia made so much money that they contributed nearly 288 billion rubles, or $3.5 billion, in corporate taxes in 2022, according to a June 8 report from Novaya Gazeta Europe. In particular, Austria’s Raiffeisen Bank almost quadrupled its net profit to 141 billion rubles, per the independent Russian news outlet.

Raiffeisen Bank is trying to spin off its operations in Russia, per a May 23 report from Reuters, citing three people familiar with the matter.

However, it is hard to break up with Russia.

More than a year after Russia invaded Ukraine, a mere 526 companies have made a clean break with the country, according to an ongoing study from Yale University. That’s despite 1,000 companies announcing they were voluntarily cutting back on operations merely two months after the Ukraine war started.

But it’s not for lack of trying: More than 2,000 companies were seeking approval to exit the Russian market, the FT reported in March, but the progress was slow due to logistical delays.

Even the ECB’s Enria acknowledged it’s difficult for foreign banks to quit Russia fast.

“Russian authorities are putting a lot of pressure on banks and placing obstacles in their way to prevent them doing that,” Enria said on Tuesday. He cited Russian presidential approval and significant hits on investments as difficulties banks face on their way out of the country.

Still, EU banks have managed to reduce their exposures to Russian counterparties by 37% in 2022, he said.

“We have been putting a lot of pressure on banks to reduce exposures,” Enria added.