The London-based arm of VTB Bank, Russia’s second-largest lender, is close to being placed into insolvency proceedings after international sanctions curbed its ability to continue operating.

Sky News understands that British banking regulators have drafted in advisers to help deal with the unravelling of VTB Capital’s operations in the City.

Banking industry sources said that VTB Capital could fall into a special administration or liquidation process as soon as this week.

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Insolvency practitioners are understood to have been lined up to handle the process, the industry sources added.

Its prospective demise has been hastened by a decision by clearing banks including HSBC to stop dealing with it in the wake of measures taken by the Office of Financial Sanctions Implementation, a division of the Treasury.

Reports in recent weeks had suggested that the VTB Capital business in London was already being wound down, with many of its staff being laid off.

If an insolvency of VTB Capital’s London arm does take place, it would be the most significant collapse affecting the City so far to arise from Russia’s war in Ukraine, although its failure would not have a meaningful impact on the UK financial system.

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A smaller broker, Sova Capital, collapsed earlier this month after being prevented from accessing a capital injection from shareholders.

Bloomberg News reported on Wednesday that VTB Capital’s wider European operations were being put up for sale – a plan that it said had the backing of banking regulators in Germany.

VTB did not respond to an emailed request for comment.

The Prudential Regulation Authority, which regulates banks and sits within the Bank of England, declined to comment, while the Financial Conduct Authority confirmed that it was engaging with the firm but declined to comment further.

HSBC declined to comment.

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