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Russia's central bank warns Western banks not to discriminate against Russian clients

A view shows Russia's Central Bank headquarters in Moscow

By Gleb Bryanski

MOSCOW (Reuters) -Russia's central bank has warned subsidiaries of Western banks that remain in Russia not to yield to pressure from Western regulators and discriminate against their Russian clients by denying them services, such as money transfers abroad.

Austria's Raiffeisen Bank International's (RBI) and Italy's UniCredit are the biggest foreign banks still present in Russia even as Western regulators, including the European Central Bank, pressure them to pull out. Both are on the central bank's list of systemically important banks. Hungary's OTP also has operations in Russia.

A Russian court froze RBI's shares in its local arm earlier this month, blocking the biggest Western bank in Russia from leaving. The Austrian bank stopped transferring money abroad for Russian clients from Sept. 1.

"We are seeing pressure," central bank governor Elvira Nabiullina said at a briefing following a policy meeting.

"The subsidiaries of European and other foreign banks in Russia were established according to Russian law. Complying with the requirements of the ECB and adhering to the sanctions of foreign states contradicts the Russian laws and discriminates against their clients," she said.

Nabiullina said the Russian regulator has issued directives to the subsidiaries of Western banks in Russia, prohibiting them from refusing to process foreign currency transfers or creating technical obstacles for such transfers.

Nabiullina accused the subsidiaries of Western banks of "segregation" among their Russian clients, providing services to some while arbitrarily denying them to others.

She said the regulator has also banned the subsidiaries from providing their head offices with information about Russian clients that could be used to discriminate against them.

"The only exception is information without which the payment cannot be processed," she said.

Nabiullina said the central bank will review the list of systemically important banks this autumn, but declined to say whether Raiffeisen and UniCredit will be removed from the list, which now comprises 13 banks, including sanctioned lenders Sberbank and VTB.

The designation implies greater state support in case of crisis.

The subsidiaries of Western banks in Russia made a windfall on commissions for international transfers after their Russian rivals lost access to the international SWIFT payment system. They also service Western corporations that remain in Russia.

Nabiullina's statements signal more problems for Western banks trapped since the start of the war in Ukraine between Russian and Western regulators and unable to leave Russia.

RBI has increasingly frustrated U.S. and European officials, who have pressured it to scale back its Russian business since the 2022 invasion of Ukraine.

(Reporting by Gleb Bryanski; Editing by Mark Trevelyan and Tomasz Janowski)