The 6 Biggest Russian Banks (SBER, VTBR)

The Russian banking system is top-heavy, largely state-controlled and heavily regulated by the Russian Central Bank. The Russian state holds majority stakes in the top two banks, Sberbank (SBER) and VTB (VTBR), which together account for more than half of the Russian banking industry's assets.

After these two giants, the next four largest banks by assets are government-controlled Gazprombank; Alfa-Bank, the country's largest privately-owned bank; Promsvyazbank, which was nationalized in 2018 and turned into a lender to the Russian defense industry; and the fully state-owned Russian Agricultural Bank.

Russia's banks first incurred U.S. sanctions after Russia invaded Ukraine and annexed the Crimean peninsula in 2014. In 2022, the U.S. and the European Union imposed severe sanctions on the Russian banking industry after Russia launched a full-scale invasion of Ukraine.

Key Takeaways

  • The Russian banking system is highly concentrated, largely state-controlled and heavily regulated.
  • The top two banks, Sberbank and VTB, account for more than half of the banking system's assets.
  • In early 2022, the U.S. and the European Union blocked access to the global financial system for several of the largest Russian banks as part of sanctions imposed on Russia for its invasion of Ukraine.

Sanctions on Russian Banks

On Feb. 22, 2022, U.S. President Joe Biden announced sanctions on two state-owned Russian financial institutions: Promsvyazbank and Vnesheconombank, along with their subsidiaries. Promsvyazbank finances the Russian defense industry while Vnesheconombank focuses on economic development including large-scale infrastructure projects. The measures froze the banks' assets in the U.S., barred U.S. individuals and businesses from any dealings with them, and shut off the banks' access to the global financial system and the U.S. dollar.

On Feb. 24, 2022, a second round of similar U.S. sanctions targeted an expanded roster of Russian financial institutions including the two largest banks: Sberbank, the leading Russian bank with about a third of the banking system's assets, and VTB Bank, which accounts for nearly 20% of Russian banking assets. Also banned were Bank Otkritie, Sovcombank, Novikombank. Alfa-Bank and Credit Bank of Moscow were barred from issuing equity and all debt with maturities longer than 14 days in the U.S.

The U.S. also targeted the financial assets of Russian officials and their families and imposed wide-ranging restrictions on technology exports to Russia. The new sanctions barred U.S. companies and individuals from buying Russian sovereign debt in secondary markets.

On March 2, 2022, the European Union said it would bar VTB, Promsvyazbank, and five other Russian banks from the SWIFT messaging system for international banking transactions. Sberbank and Gazprombank were reportedly allowed to remain in SWIFT for the time being because of their role in processing payments for essential Russian energy exports to Europe.

Sberbank

Sberbank's history stretches back to 1841, when Russia established a network of state-owned savings banks. It remains by far the largest Russian bank with approximately a third of the banking system's assets at $543.1 billion as of September 2021.

Sberbank's 100 million retail customers account for approximately half of Russia's deposits and credit card accounts. The Russian Government owns a stake of just over 50% in Sberbank, which it acquired from the Russian Central Bank in 2020. Sberbank's stock is listed on the Moscow Exchange.

The U.S. Treasury called Sberbank "uniquely important to the Russian economy" in February 2022, when it barred U.S. institutions from processing Sberbank transactions to punish Russia's invasion of Ukraine, while stopping short of the full blocking sanctions imposed on other top Russian banks. In addition, the U.S. sanctioned Alexander Vedyakin, first deputy chair of the bank's executive board.

In March 2022 the European Union omitted Sberbank while barring seven other top Russian banks from the SWIFT messaging system for international financial transactions because of Sberbank's key role in facilitating essential Russian energy exports.

VTB

The second-largest Russian bank and another majority state-owned one, VTB was founded as Vneshtorgbank (Foreign Trade Bank) in 1990. The Russian government holds 92.2% of the bank's share capital, including 60.9% of its ordinary shares. Assets totaled $278.9 billion as of Dec. 31, 2021 at that day's exchange rate. VTB shares are listed on the Moscow Exchange.

The U.S. Treasury imposed full blocking sanctions on VTB in February 2022. freezing the bank's U.S. assets and excluding it from the global financial system. The U.S. said the sanctions would "sever a critical artery of Russia’s financial system." The U.S. also sanctioned two VTB executives and a spouse of one of the men; it placed CEO Andrei Kostin on the sanctions list in 2018.

In March 2022, the European Union said it would bar VTB from the SWIFT messaging system for international banking transactions as punishment for Russia's aggression in Ukraine.

Gazprombank

Russia's third-largest bank by assets, Gazprombank was founded in 1990 by Russian natural gas giant Gazprom (GAZP) to provide banking services to the energy industry. Gazprombank reported assets of $101.8 billion as of year-end 2020 at the exchange rate prevailing at the time.

The bank is predominantly owned by Gazprom and related entities, including Gazprom's pension fund. While it continues to focus on energy financing, Gazprombank has expanded lending to other sectors of the Russian economy.

In February 2022, the U.S. Department of the Treasury barred U.S. businesses and individuals from participating in all financing transactions for Gazprombank excluding debt maturing in 14 days or less. The U.S. also sanctioned Gazprombank board member Sergei S. Ivanov, the CEO of Russian state-owned diamond mining company Alrosa.

In March 2022, the European Union left Gazprombank off its initial list of seven Russian banks barred from the SWIFT messaging system for international banking transactions, reportedly because of Gazprombank's role in facilitating payments for essential Russian energy supplies to Europe.

Alfa-Bank

Alfa-Bank is Russia's fourth-largest financial institution by assets and its largest privately owned one. Assets totaled $75.9 billion as of year-end 2021.

Alfa-Bank was founded in 1990 by Mikhail Fridman, a Ukrainian-born Russian oligarch and Israeli citizen reputed to be close to Russian President Vladimir Putin. Alfa-Bank's fortunes improved after Petr Aven, Russia's former foreign economic relations minister, became Fridman's partner in the business in the mid-1990s.

In sanctioning Fridman and Aven in February 2022, the European Union said Fridman "managed to acquire state assets through government connections," adding that Putin rewarded his loyalty by aiding the foreign investment plans of Alfa-Bank's parent company. Fridman "has been referred to as a top Russian financier and enabler of Putin’s inner circle," the EU's sanctions statement noted. The same statement called Aven "one of Vladimir Putin's closest oligarchs." Fridman and Aven dispute those claims.

Also in February 2022, the U.S. and the European Union restricted Alfa-Bank's ability to raise capital abroad, while sparing it the full blocking sanctions imposed on VTB and several other Russian banks.

Promsvyazbank

Founded in 1995 by brothers Dmitry and Alexei Ananyev, who had been telecom technology entrepreneurs, Promsvyazbank became one of the fastest-growing Russian banks, a process aided in 2015 by several acquisitions. Along the way, it drew substantial minority investments from Germany's Commerzbank AG (CBK) and the European Bank for Reconstruction and Development.

The Russian Central Bank took over Promsvyazbank in 2017 alleging financial improprieties, and the Ananyev brothers were subsequently convicted in absentia of embezzlement by a Russian court.

In 2018, the central bank transferred control of Promsvyazbank to the Russian government, which turned it into a defense industry lender. Dmitry Ananyev has alleged from exile in Cyprus that defense industry financing was the motive for Promsvyazbank's seizure. Promsvyazbank's assets totaled $53.5 billion as of year-end 2021 based on the exchange rate prevailing at the time.

In February 2022 the U.S. imposed full blocking sanctions on Promsvyazbank and also sanctioned Promsvyazbank CEO Petr Fradkov. In March 2022 the European Union barred Promsvyazbank and six other Russian banks from the SWIFT messaging system for international bank transactions.

Russian Agricultural Bank

Russian Agricultural Bank is a state-owned bank established in 2000 to finance agricultural development. Assets totaled $53.5 billion as of Sept. 30, 2021 at the then-prevalent exchange rate.

In February 2022 the U.S. restricted the Russian Agricultural Bank's ability to raise capital but spared it full blocking sanctions. It was not included on the European Union's list of seven Russian banks barred from the SWIFT messaging system.

Article Sources

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