European banks take steps to insulate IT systems in Russia

Bloomberg

European banks operating in Russia are preparing to separate those business from their main computer systems to reduce their vulnerability to cyber-attacks following the invasion of Ukraine.
Commerzbank AG is preparing to cut off its Russian unit from its system as one potential scenario and already has the ability to rapidly sever the connection through what’s internally known as “kill switch.” Deutsche Bank is transferring essential information technology tasks from the country to other locations, another person said. BNP Paribas already cut off staff in Russia from its systems, Reuters reported.
Officials for the banks declined to comment. The people familiar asked for anonymity to discuss internal matters.
Cyber warfare has become a major concern in the wake of Russia’s invasion of Ukraine, particularly at banks, which rely on massive IT infrastructure to conduct business. Deutsche Bank has seen “increased cyber-attacks” since the start of the war, it said it in its annual report. Societe Generale SA is asking staff for extra vigilance in online communications, according to a memo seen by Bloomberg News.
While the two German banks plan to exit Russia, that process will take time, leaving them exposed for now. Deutsche Bank has a big tech center in Russia with about 1,600 staff.
Chief Financial Officer James von Moltke told Bloomberg TV that the lender is “proactive” on cyber risks emerging in the country. It took steps in the years before the invasion to reduce cyber risks at the unit, including by getting rid of external staff, von Moltke said in the interview.
Apart from seeking to insulate the Russian units, many lenders have increased the general internal alert level for IT threats and asked staff to be vigilant. They’ve also set up teams to work on contingency plans and stress-tested their IT infrastructures.

UniCredit considering exit from Russia
UniCredit said it is considering exiting its operations in Russia as part of an urgent review of the business, signalling an accelerating financial pull-back from the nation as a consequence of the invasion of Ukraine.
“No conclusions can be drawn overnight, but we will report soon with more detail,” Chief Executive Officer Andrea Orcel said a conference organised by Morgan Stanley on Tuesday. “Obviously we need to seriously consider the impact and the consequences and the complexity of disentangling a full bank from the country.”
The Milan-based lender joins a growing list of European banks starting or seriously considering withdrawing from Russia in the wake of the invasion of Ukraine, with Deutsche Bank AG reversing course and announcing a pull-out last week. UniCredit is among European lenders with the biggest exposures to Russia, along with Austria’s Raiffeisen Bank International AG and France’s Societe Generale SA.
Loans to customers of UniCredit’s Russian unit amounted to 7.8 billion euros at end December, while cross border exposure to Russian customers is about 4.5 billion euros.
Orcel said that given the situation the bank would not invest “a penny more” in the country.
UniCredit has already said that in an extreme scenario where its Russian banking assets are wiped out, it would suffer a hit of about 200 basis points to its capital buffers. The lender has confirmed that it intends to pay its planned dividend on 2021 earnings.
Moves by European lenders towards pulling out of Russia follow decisions by Wall Street peers to limit activity. Goldman Sachs Group Inc has said it plans to close operations there.
“My number one job is to ensure the overall stability of our bank and our ability to serve our communities across Europe,” Orcel said. “Unwinding a bank that employs over 4,000 people and services more than 1500 corporate clients, 1,250 of which are European corporates, as well as absorb a shock that could reach up to 7.5 billion euros, cannot and should not be done without careful consideration.”