European banks in Russia face ‘awful lot of risk’, Yellen says

U.S. Treasury Secretary Janet Yellen told Reuters that European banks face increased risks doing business in Russia and the United States is considering tougher secondary sanctions against banks found to have transactions supporting Russian war efforts.

In an interview with Reuters, Yellen said “we are looking at the possibility of further strengthening sanctions on banks doing business in Russia,” but did not provide any specifics or identify which banks would be targeted.

Speaking on the sidelines of a Group of Seven finance ministers meeting in northern Italy, Yellen said sanctions on Russian banking transactions would be imposed “only if there is a reason to do so,” adding that “doing business in Russia creates significant risks.”

Asked whether she wanted Austria’s Raiffeisen Bank International and Italy’s UniCredit to withdraw from Russia, Yellen said: “I think their bosses are advising them to be extremely careful in their actions in Russia.”

European Central Bank policymaker Fabio Panetta gave clear instructions to Italian banks on Saturday. Speaking to reporters The lenders must “exit” Russia because staying in the country would create “reputational problems.”

Raiffeisen is the largest European financial institution operating in Russia, followed by UniCredit, a major Italian lender. Intesa Sanpaolo It is working on disposing of its Russian operations.

Joe Biden’s new US President Secondary sanctions powers The bill would give the Treasury Department the power to bar banks from the U.S. financial system if they are found to be helping evade key sanctions against Russia and other entities over Moscow’s war in Ukraine.

Yellen and other Treasury officials have said Russia’s economy is increasingly becoming a “war economy,” making it more difficult to distinguish between civilian and military, or dual-use, transactions.

With secondary sanctions already chilling relations between the bank and Russia, Yellen expressed concern that Russia is finding ways to get access to the supplies it needs to expand its military production, citing transactions through China, the United Arab Emirates and Turkey.

Earlier this month, the Treasury Department Raiffeisen warned A person who has seen the letter told Reuters it says access to the dollar-denominated financial system could be cut off because of business with Russia, citing a proposed 1.5 billion euro ($1.6 billion) deal with a Russian tycoon who is subject to sanctions.

After the warning, Raiffeisen The plan was abandoned. More than two years after the invasion of Ukraine, the move comes as a blow to the bank, which is seeking to sell industrial holdings linked to tycoon Oleg Deripaska.

The pressure underscored Washington’s aggressive pursuit of European banks over their ties to Russia.

Yellen on Tuesday in Germany’s financial capital Frankfurt Bank CEOs Warned Strengthen efforts to comply with sanctions against Russia and discourage evasion tactics aimed at avoiding potentially severe penalties.