JP Morgan has severed correspondent banking ties with two of Russia's largest banks, Sberbank and VTB, according to Russian media reports on the eve of the 2014 Winter Olympics in Sochi.
The move by JP Morgan to distance itself from the two banks, which was first reported in the Russian financial daily Kommersant Thursday, came in January, when, a source told the newspaper, JP Morgan instituted transparency standards so strict they were "impossible," thus forcing Sberbank and VTB to seek other correspondent banking partners. Sberbank has since selected Bank of America and Bank of New York to replace JP Morgan, while VTB has selected Bank of America and Citi as its correspondent banking providers.
The Kommersant story called JP Morgan's decision "understandable" given the fact that its run into so much legal trouble in the last year, eventually settling with the U.S. Justice Department for $13 billion last fall, and that its ties to Bernie Madoff cost it another $2.2 billion in legal settlements. But the story questions why JP Morgan would cut its ties with only Sberbank and VTB, and not the myriad other Russian banks it has correspondent banking relationships with, such as Promsvyazbank.
One Russian financial industry expert said JP Morgan's move is "quite a slap in the face for two of Russia's biggest state banks not to be able to move dollars because they are so crooked."
JP Morgan would not comment.
Mariah Summers is a business reporter for BuzzFeed News and is based in New York. Summers reports on hospitality, travel and real estate.
Contact Mariah Summers at email@example.com.
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