World Economy

ECB Regulation Criticized

ECB Regulation CriticizedECB Regulation Criticized

The head of Russia’s biggest bank has criticized the European Central Bank for forcing its eurozone subsidiary to be supervised by officials in Frankfurt and making it raise more capital.

Herman Gref, chief executive of Sberbank, told the Financial Times in a recent interview that “European banking will have a very, very difficult period of time now” because “the regulatory policy is quite difficult”.

“I can’t understand what they are doing, frankly,” said Gref, a former Russian economics minister who has run Sberbank since 2007. The ECB declined to comment.

Sberbank’s Austrian subsidiary was subjected to a stress test by the ECB in 2015 after being added to the list of banks considered systemically significant along with that of Russia’s VTB and a number of other lenders.

Sberbank and VTB had to inject an extra €240m and €200m into their Austrian units, respectively, after they both failed the ECB stress tests by falling below the minimum capital required under the adverse scenario.

“If you have the push from the market, a squeeze from the regulator and bad macroeconomic conditions, you know, it does affect your health quite badly,” said Gref, arguing that Europe’s tough regulatory stance was handing US banks a big advantage.

“The banking system is in its most dramatic period of its history,” he said. “If you look into the future of the European banks, we think it will be quite a difficult one. American banks have quite a different macroeconomic situation and their regulation is different.”

Sberbank, which is listed in Moscow and London but still majority owned by the Russian government, bought Volksbanken International, a network of branches in eastern Europe including Hungary and Croatia, as part of an acquisition spree in 2012.

It is now slimming down in the region and recently sold its Slovakian operations. Russia’s biggest lender with assets of $355b has faced “three black swans” this year, according to Gref, a noted proponent of liberal market reforms who was a minister during Vladimir Putin’s first two terms as Russian president.

He said Russia’s three main problems were the drop in the oil price, western sanctions and the slow pace of structural reform.