(Bloomberg) – In the UK, the government had previously given banks 30 days to sever ties with Russia’s VTB bank. Companies want more time.
Finance executives have again asked for an extension of the deadline for concluding contracts with VTB, which people explained in the discussions said, in order to avoid financial impact or freezing of resources.
Many companies have derivative agreements with VTB, which require a 30-day notice period – a little longer than the authorities’ deadline for concluding contracts with the Russian bank, anonymous sources said.
VTB issues are among the many issues facing international companies in line with the growing list of sanctions imposed on Russia’s financial sector by the UK, EU and US. The focus on VTB is due to its size as the second largest bank in Russia and its high presence in corporate and investment banking operations.
“There are complex derivative transactions where the parties have short-term and long-term obligations. None of these rules are designed with these transactions in mind,” said Barney Reynolds, head of financial services at law firm Shearman & Sterling, explaining the challenges in modifying financial contracts.
“It is very difficult to determine what you can and cannot do. It can be complicated and lead to significant losses.
VTB faces tough sanctions from the US and UK, which are trying to isolate Russia financially through higher fines. EU ambassadors this week agreed to exclude VTB and six banks from the SWIFT Financial Reporting System.
The British government surprised the financial community in London on Thursday by announcing the immediate freezing of VTB’s assets. The government said on Friday that companies had 30 days to sever ties with VTB, following warnings that the move could prevent Russian companies’ employees from being paid in the UK.
Could not contact VTB for comment. The British Treasury did not respond to requests for comment.
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