Luxembourg-based East-West United Bank will shut down, after incurring a loss of €57.91m last year, in stark contrast to a €1.25m loss in 2021, according to its annual report filing dated Wednesday 2 August 2023.
Asset meltdown
The bank’s assets suffered a steep decline, particularly after Russia’s military invasion in Ukraine and the resultant sanctions imposed by Western nations and the European Union, Luxembourg included.
Regulatory documents indicated that the bank’s total assets shrank from over €724m to just €152m at the end of 2022. This grim tally led the bank’s management to opt for a full termination of its operations, as highlighted in a note from the managing directors.
“Due to low probability of the positive turnaround of the situation in the foreseeable future, the management as well board of directors has taken a decision to full wind-down its Banking activities with the objective to return its banking license,” stated the management report.
During the 2022 fiscal year, the average full-time equivalent (FTE) employment was 85, a decrease from 104 in the previous year, 2021.
Financial instability
This announcement came on the heels of multiple signals indicating the bank’s fragility.
In November 2022, East-West United Bank announced that it would .
In a related development, Sistema, the Russian conglomerate owning the bank, indicated plans to offload the Luxembourg-based financial institution .
Established in 1974, East-West United Bank initially represented Soviet interests in the Benelux region. Following the dissolution of the Soviet Union in 1992, Russia-based Imperial Bank acquired a 49% stake in the institution. By 2002, Sistema took complete ownership.
In governance-related changes, former economy ministers of Luxembourg, Jeannot Krecké and Etienne Schneider, who were associated with East-West United Bank and its parent company Sistema, respectively, tendered their resignations in February 2022. Their departures came amid mounting public pressure following Russia’s invasion of Ukraine.
Editorial note: The story was updated Thursday 24 August at 15:00 with information from the Luxembourg Business Register.