The UK arm of Russia’s second-biggest lender has applied to go into administration, citing the impact of “paralysing” sanctions imposed since Russia’s invasion of Ukraine.
VTB Capital says it has been unable to find a bank that would allow it to open or operate an account and so cannot pay its debts as they fall due.
A majority of its directors applied to London’s High Court on Wednesday for an order to appoint administrators.
Daniel Bayfield QC, representing the directors, told a court hearing that the move would allow an orderly wind-down of the company, which is balance-sheet solvent with net assets of $ 338mn.
Bayfield told the court that the lack of banking facilities meant company operations “have been paralyzed even beyond the paralysis caused by sanctions. The company can not make any payments. ”
Mr Justice Timothy Fancourt said he was willing in principle to make the order appointing administrators – but he said a formal order would not be made by the court until a license had been obtained from the US Office of Foreign Assets Control (Ofac), which administers the US sanctions regime.
The High Court heard VTB Capital had discussed its application with financial regulators including the Prudential Regulation Authority, the Financial Conduct Authority and the Bank of England, which had not opposed its plans.
It has also received an adjustment from the UK Office of Financial Sanctions Implementation that permits payments relating to insolvency proceedings – although Ofac is yet to grant a similar license. Teneo is the proposed administrator, the court heard.
VTB was added to the EU sanctions list on Tuesday, with Ursula von der Leyen, European Commission president, saying the bank would be subject to a “full transaction ban” and would now be “totally cut off from the markets”.
But the move was largely symbolic as VTB had been in the process of winding up its European operations since early March. It had already been hit by US sanctions, kicked off the Swift global payments messaging system and had its assets frozen in the UK.
During VTB’s global expansion in the 2000s, the bank took out a 20-year lease on five floors at 14 Cornhill, a Grade II-listed office building in the heart of the City of London, and initially hired more than 500 bankers. That has since shrunk to about 60 after staff were let go or relocated to Frankfurt following Russia’s annexation of Crimea in 2014 and then Brexit.
VTB has also fallen behind on rent payments for its London offices having been banned from paying or receiving rent since being hit with sanctions, which has left its landlord, the Libyan sovereign wealth fund, out of pocket.
The UK arm of Sberbank, Russia’s biggest bank, was ordered to be wound down by a London judge last week.