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Russia's VTB condemns Bank of England's 'unjust' demands

Cars drive past an office of VTB bank in Moscow, April 29, 2013. REUTERS/Sergei Karpukhin

MOSCOW (Reuters) - Russia's second largest bank VTB said the Bank of England had made demands of its UK subsidiary regarding capital and liquidity which were "unjust" although it saw no immediate threat to its business there.

The European Union and the United States have imposed targeted visa bans and asset freezes on Russian and Ukrainian individuals, aimed at punishing Russia's elite for annexing Ukraine's Crimea region, but have stopped short of broader economic sanctions. VTB has not been targeted in the sanctions.

"We do not see a threat (to close our business there) at the moment, but all will depend on what the decision, compromise will be," VTB CEO Andrei Kostin told a news conference called to announce the bank's three year strategy. "We are not at the boiling point yet."

Kostin said that the bank had not noticed pressure on its businesses in Europe or the United States.

He said in an interview with Russia's Izvestia newspaper earlier on Thursday that the bank had experienced unusual demands from the Bank of England in relation to its subsidiary which he suspected had political motives.

"In the last weeks, we have experienced very strong pressure from the Bank of England towards our bank VTB Capital Plc in London," said Kostin, replying to a question about whether VTB had been hit by any punitive measures that were not made public.

The bank's chief financial officer, Herbert Moos, later said that the Bank of England's unjust additional demands were regarding capital and liquidity.

The Bank of England declined to comment.

Britain has taken a hard line on banks generally since having to bail out several lenders in the financial crisis and step in to reimburse account holders in a failed Icelandic bank.

Foreign banks are under pressure to hold adequate amounts of capital and liquidity in Britain to avoid taxpayers having to step in if they go bust.

VTB operates an investment banking subsidiary in the UK but a press officer for the investment bank declined to give any details about the operations or how many people work there.

The bank said last week that it expects the situation in Crimea and Ukraine to normalise, adding: "We do not expect additional sanctions against Russian enterprises or banks."

The situation in Crimea has affected banks in general - VTB and larger rival Sberbank saw their shares fall sharply due to uncertainty over what impact the Ukraine crisis and subsequent sanctions will have on Russia's economy.

Sberbank CEO German Gref said on Thursday that Sberbank plans to grow globally and was not expecting any sanctions. He was responding to a question about sanctions at a press briefing on an unrelated topic.

VTB made the remarks about the Bank of England as it unveiled its growth strategy for the coming three years. It wants to increase profits by up to 80 percent by 2016 but said that profits this year may be harder to achieve due to provisions related to its exposure to Ukraine.

VTB aims to boost profits to 160-180 billion roubles (2.6-2.98 billion pounds) in 2016, from 101 billion last year, with the higher number based on the scenario of a strong economy and the lower number based on a more realistic economic situation.

VTB has previously said it has exposure to Ukraine of 20 billion roubles and that its operations there amount to about 2-3 percent of the bank's total operations. It has said that it still considers Ukraine to be one of its key markets.

It forecasts total assets will grow to 12-13 trillion roubles, from 8.8 trillion roubles last year. Return on equity will grow to 15 percent, from 12 percent, VTB said.

(Reporting by Oksana Kobzeva, Megan Davies and Alessandra Prentice in Moscow and Huw Jones in London, writing by Megan Davies, editing by Elizabeth Piper and Elaine Hardcastle)