UniCredit Asks Court For Clarity As ECB Orders Russia Cuts

A branch of Unicredit Bank in Moscow.

(Bloomberg) -- UniCredit SpA asked a top European court to assess the legality of some elements in a decision by its main regulator forcing the Italian lender to further reduce its presence in Russia.

UniCredit has applied to the General Court of the European Union for “definitive legal clarification” of obligations set by the European Central Bank for winding down its Moscow-based division, according to an e-mailed statement on Monday.

UniCredit said while it is aligned with the ECB on the need to shrink its Russian business, it has concerns about the terms of the reduction. While its application is being heard, which could take several months, the Italian lender has asked for an interim suspension of a related ECB decision.

UniCredit's request comes after the ECB this year raised the pressure on several European banks with sizable business in Russia to pull back from the country. Austrian lender Raiffeisen Bank International AG said in April that the ECB was set to order a 65% reduction in its Russian loan book, far more than what it had planned. UniCredit received a similar communication, though it hasn't said what the targets were.

Russian authorities, meanwhile, have made it difficult for international firms to withdraw from the market, putting lenders in a bind. Given the complexities and the lack of a harmonized regulatory framework, UniCredit said in the statement it has concerns that the implementation of some of terms requested by the ECB could have “serious unintended consequences” that would impact the whole bank.

The application to the General Court was made “in full knowledge of the ECB,” UniCredit said.

A spokesperson for the ECB declined to comment.

UniCredit operates in Russia through a subsidiary with some 3,100 employees and more than 50 branches. Since the beginning of Russia's war against Ukraine, the Milan-based lender put aside funds against defaults in Russia and wrote down the value of its business there.

Chief Executive Officer Andrea Orcel has so far eschewed the kind of full-scale exit from Russia conducted by Societe Generale SA. The lender is proceeding with a plan to cut the Russian cross-border exposure to zero by the end of next year.

(Updates with ECB declining to comment in seventh paragraph.)

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