(Bloomberg) -- The U.K. arm of VTB Bank PJSC is seeking administration after sanctions “paralyzed” its operations, becoming the latest Russian financial entity to fall victim to the repercussions of the war in Ukraine.
A London judge indicated at a hearing on Wednesday he would allow the appointment of administrators for VTB Capital. He said this shouldn't take effect until the unit obtains a license from the U.S., mirroring what VTB requested. The bank said this would pave the way for the unit to be wound down in an orderly way.
“The company's operations have been paralyzed even beyond the paralysis caused by the sanctions,” Daniel Bayfield, a lawyer acting on behalf of the company, said on Wednesday. “This administration is designed to get a better result for creditors.”
While administration would smooth the closure of the company, it may be possible to rescue the firm as a going concern if sanctions are lifted, Bayfield said. Moscow-based VTB, Russia's second largest lender, is one of several institutions to be sanctioned by the U.K. government following Russia's invasion of Ukraine. Representatives of the bank didn't respond to emails seeking comment.
Read More: Tracking the Sanctions Imposed on Russia Over Ukraine Invasion
HSBC Holdings Plc, which was VTB's correspondent bank, ceased operating with the firm last month, according to Bayfield. While the firm is not balance-sheet insolvent, difficulty in getting licenses to facilitate the wind down and the inability to get a bank account have meant the business cannot pay essential debts.
The filing comes just days after a London judge ordered the U.K. arm of Russia's biggest lender, Sberbank of Russia PJSC, to be wound down. VTB's separate European unit has been put up for sale, which German regulators support because it will avoid a messy unraveling.
Teneo Inc., which is handling the administrations of Sberbank and another Russian-owned company called Sova Capital Ltd., are the proposed administrators for VTB, according to Bayfield.
VTB's presence in London has been shrinking for years, as the bank shifted more of its operations to Frankfurt and Switzerland. Accounts filed in the U.K. show that assets in its London-based subsidiary peaked in 2014 at $11.6 billion and shrank to $1.66 billion by 2020, while staff numbers fell from about 400 to about 150.
With the war into its second month, the U.S. and allies are currently coordinating on a new round of sanctions. That includes a bar on all new investments in Russia, to punish the Kremlin for the alleged murders of civilians by its forces in Ukraine.
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