(Adds details, context, UniCredit shares in paragraph 11)

WASHINGTON/ROME, April 19 (Reuters) – The European
Central Bank is poised to order Italy’s UniCredit to
cut back its business with Russia, two people with knowledge of
the discussions said, as the regulator exerts pressure to choke
off European financial ties with Moscow.

The demands on the second-biggest European bank in Russia
would be similar to what the ECB wants from Austria’s Raiffeisen
Bank International (RBI), the largest Western bank
active in the country, the people told Reuters, requesting
anonymity because the matter is confidential.

The ECB and UniCredit declined to comment.

RBI said on Thursday that the ECB will ask it to cut lending
in Russia as well as payments within a set timeframe.

After months of discussions, the ECB is set to send
UniCredit a legally-binding order, the sources said, in a
significant stepping up of pressure to pare back its Russia
business. This is the penultimate step before the ECB can impose
penalties, such as fines.

A formal ECB warning to UniCredit would offer Italy’s
second-largest bank a final opportunity to avert such an
enforcement procedure by the supervisor that could lead to
sanctions, another person with knowledge of the situation said.

Two years after Russia’s full-scale invasion of Ukraine,
European regulators are ratcheting up pressure on its lenders as
the conflict shows no sign of abating.

Western nations have been tightening sanctions on Russia and
the Group of Seven industrial democracies is now studying ways
to harness frozen Russian sovereign assets to help fund Ukraine.

Yet two of the region’s big lenders, RBI and UniCredit,
continue to do business in Russia, drawing scrutiny too from
authorities in the United States, people with knowledge of the
matter have told Reuters.

Both banks have been in Russia since the collapse of the
Soviet Union more than three decades ago.

Shares in UniCredit extended losses slightly after the
Reuters report, falling as much as 0.5%, before recovering to
last trade down 0.3%.
(Reporting by Francesco Canepa, Giuseppe Fonte, John O’Donnell
and Alexandra Schwarz-Goerlich; additional reporting by
Valentina Za and Stefania Spezzati; writing by Elisa Martinuzzi;
editing by Tommy Reggiori Wilkes and Alexander Smith)