The move by VTB has the potential to facilitate greater capital inflows into Russia, according to Marcus Hopkins, executive director at London-based Moscow Narodny Bank (MNB), one of the banks involved.

“You’ve now got a banking institution in Europe that is Russian-owned and that can channel FDI and capital inflows into Russia,” he said.

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Of the purchased banks, VTB has stakes in Donau Bank, Ost West and East West United, and also wholly owns Russian Commercial Bank (of Cyprus) and Russische Kommerzial Bank (of Switzerland). It will buy the remainder of Donau and Ost West as well as MNB and BCEN Eurobank. The Russian Central Bank has shares in most of them.

VTB has grown significantly in size since the arrival of a new chairman, Andrei Kostin, in 2002, with the takeover of the troubled Guter Bank on behalf of the government in 2004 and its expansion into Ukraine, Georgia and parts of Europe.

Regulatory approval for the acquisitions has been received from all of the necessary western European governments and the deal looks set to be completed by year-end. It will mean a $1.6bn capital increase for VTB and consolidate its position as Russia’s second largest bank.

Apart from an anticipated positive effect on FDI into Russia, Mr Hopkins said the central bank’s divestiture of institutions it took over after the collapse of the Soviet Union shows “the progress many years on” that is occurring in Russia’s political economy.