European banks in Russia face 'awful lot of risk', Yellen says

U.S. Treasury Secretary Janet Yellen told Reuters that European banks face growing risks operating in Russia and the U.S. is looking at strengthening its secondary sanctions on banks found to be aiding transactions for Russia's war effort.

"We are looking at potentially a tougher stepping-up of our sanctions on banks that do business in Russia," Yellen told Reuters in an interview, declining to provide specifics and not identifying any banks at which they could be aimed.

Speaking on the sidelines of a G7 finance leaders meeting in northern Italy, Yellen said that sanctions related to banks' dealings in Russia would only be imposed "if there was a reason to do so, but operating in Russia creates an awful lot of risk," she added.

Asked whether she would like to see Austria's Raiffeisen Bank International and Italian bank UniCredit pull out of Russia, Yellen said: "I believe their supervisors have advised them to be extremely careful about what they do there."

European Central Bank policymaker Fabio Panetta had clear instructions for Italian banks on Saturday telling reporters that lenders must "get out" of Russia because staying in the country brings a "reputational problem."

Raiffeisen is the largest European lender doing business in Russia, followed by UniCredit. Another large Italian lender, Intesa Sanpaolo is working to dispose of its Russian business.

U.S. President Joe Biden's new secondary sanctions authority gives the Treasury the power to cut off banks from the U.S. financial system if they are found to be assisting the circumvention of primary sanctions against Russian and other entities over Moscow's war in Ukraine.

Yellen and other U.S. Treasury officials have said that Russia's economy is increasingly a "war