Citi asked customers to leave – Kommersant Newspaper No. 194 (7395) dated 10/19/2022

Citibank, which has decided to close its retail business and SME customer service in Russia, has announced that it is also curtailing work with corporate clients. In the letters sent out, the bank urges not to delay in transferring business to other credit institutions and closing accounts with Citi. At the same time, the bank will retain the service, which is “required in accordance with the legal and regulatory obligations of the company.”

Russia’s Citibank has started to notify foreign corporate clients of the phase-out of operations. One of the bank’s clients received such a letter, he told Kommersant.

At the end of last week, as part of the announcement of financial results for the third quarter of 2022, the parent organization, the American Citi, made a statement regarding the provision of services and services for corporate clients in the Russian Federation. In particular, it is supposed to stop “providing almost all services in Russia for corporate clients by the end of the first quarter of 2023.” Going forward, Citi’s operations in the country will include only those operations and services required “in accordance with the company’s legal and regulatory obligations.”

As one of the financial lawyers explained to Kommersant, the credit institution must fulfill the prescribed services and conditions in the contract between the bank and the client until the expiration of the contract. The desire of the owner to terminate activities in Russia is not a basis for early unilateral termination of contractual obligations.

“The bank cannot demand early repayment of the loan, the return of the deposit, the withdrawal of the guarantee, and so on. This is precisely what explains this reservation, ”the interlocutor of Kommersant clarified. However, they can be terminated by agreement of the parties, but the question is to what extent the bank and its Russian clients are interested in the urgent curtailment of their business in the country.

Sanctions also make effective customer service difficult, according to a letter received by a Citi customer. Against this backdrop, the bank intends to carry out the winding-up process in two stages. By the end of January, it is planned to “significantly reduce” foreign exchange transactions, and by the beginning of April – to stop all services except for those that the bank is legally obliged to perform.

In this regard, the bank proposes to transfer the operating business to other credit institutions and close accounts with itself, specifying that the designated deadline for completing operations will not be extended.

Citi previously said that in the process of winding down the business, “it will seek to sell some portfolios of the retail business.” However, as Olga Ulyanova, an independent expert, notes, all large banks that could freely buy out Citibank’s portfolio in large lots are under sanctions. And the option of selling by separate “tickets” will require painstaking work, the expert notes.

Western banks have always had funding support from their parent companies, notes financial expert Nadezhda Gromova. “By having a cheap resource rate, they can offer top class borrowers a competitive rate. If such a business is sold, then the loan portfolio passes to a new owner, and funding from the parent Western company disappears,” she points out.

At the same time, Citibank clients have a place to go in the Russian market. “Other foreign banks that are under pressure from their parent structures to exit Russia are not in the worst position. They did not fall under the sanctions, they carry out calculations and pulled over a significant part of the market,” Olga Ulyanova points out.

Olga Sherunkova, Maxim Builov, Olga Nikitina