(Bloomberg) – Europe is splitting Sberbank of Russia PJSC’s business in the region after sanctions over President Vladimir Putin’s invasion of Ukraine led to the flight of local deposits.
Most read by Bloomberg
Austria-based Sberbank Europe AG will be liquidated through local insolvency proceedings, while all shares in its Croatian and Slovenian subsidiaries will be transferred to other companies in those countries, according to the Single Restructuring Board, which deals with insolvent European creditors. Shares of the parent company, listed in London, fell 90% on Wednesday, while trading in Russian shares remained closed.
Read more: Sberbank fell 90% in London, and the local market is still closed
The United States and the European Union are stepping up measures against Russia by blocking some of the national banks in various parts of the global financial system. As early as last week, the United States said it was sanctioning five of Russia’s largest creditors, including Sberbank and VTB Bank PJSC. While Sberbank in Europe is only part of the lender’s overall business, its closure is an additional blow to Russia.
“I think it’s fair to say that it was a bank run, which was really caused by increased geopolitical risk and sanctions,” Elke Koenig, who runs SRB, told reporters on Wednesday. “This is not insolvency due to negative equity, but insolvency due to lack of liquidity.
On Monday, SRB suspended most payments at three of the bank’s branches after the European Central Bank ruled that Sberbank Europe and its subsidiaries in Croatia and Slovenia were unlikely to be able to pay their debts or other debts.
Hrvatska Postanska Banka, the only large state-owned bank in Croatia, will acquire Sberbank’s business in the country, while Nova Ljubljanska Banka will take over operations in Slovenia. Bloomberg announced their offers earlier on Tuesday.
Units in both countries will open on Wednesday “as usual, without interruption to depositors or customers,” SRB said. “They are already part of well-established, stable and stable banking groups.”
The Austrian financial markets regulator has said it has banned Sberbank Europe from continuing to do business. This triggers compensation for customers, giving the country’s guarantee system 10 banking days to pay up to 100,000 euros ($ 111,260) to a depositor.
Covered deposits
Sberbank has decided to withdraw from the European market after facing an accumulation of deposits, Russia’s largest lender said in a statement on its website. The bank failed to provide liquidity to its subsidiaries due to an order from Russia’s central bank, but local assets are enough to pay off all depositors, Sberbank said.
Koenig confirmed this, saying she was “very confident” that Sberbank Europe’s assets would cover its deposits, although it was not yet clear whether they would be enough for all its liabilities. Sberbank Europe previously reported 13.6 billion euros in assets.
The Austrian Deposit Guarantee Fund, backed by the country’s banks, said on Wednesday that it covers about 913m euros out of 1 billion euros in total deposits in the local unit. Sberbank’s Vienna-based division has about 35,000 private depositors, almost exclusively based in Germany but protected by the Austrian system.
Including Sberbank, the seven-year-old SRB has dealt with the bankruptcy of six banks, the last of which was in 2019. The Brussels-based regulator monitors creditors with cross-border businesses and other major banks, leaving the bankruptcy of smaller banks such as Greensill Bank AG in Germany last year. year, in the hands of national authorities.
The European Commission states in a separate statement that the Czech authorities have decided to close and liquidate the Sberbank branch in this country, and depositors are entitled to the same legal compensation as in Austria. Regulators in Hungary have also ordered the closure of Sberbank’s Budapest branch.
VTB Bank OJSC, a Russian lender that has come under tougher sanctions than Sberbank, does not accept new customers in its German division, but existing customers who are not subject to sanctions can gain access to their deposits, said German regulator BaFin. -early this week.
“For now, the financial system in Europe is definitely a stable financial system, but of course you never know what the future holds,” Koenig said. “But I would not consider something inevitable on our part. Needless to say, Russian-owned banks are under stress.
(Updates on trade in London in second place)
Most read by Bloomberg Businessweek
© 2022 Bloomberg LP