The EU subsidiary of the state-run bank is insolvent.
(Photo: Reuters)
Frankfurt The EU subsidiaries of the largest Russian money house Sberbank are on the verge of collapse. According to the European Central Bank, Sberbank Europe AG, a wholly owned subsidiary of Sberbank Russia, and its Croatian and Slovenian branches are or are about to be insolvent.
Apparently, the daughter of the largest Russian financial institution had a bank run. Customers withdrew large amounts of money because they were obviously worried about the bank’s solvency in view of the sanctions.
“Sberbank Europe AG and its subsidiaries have experienced significant deposit outflows due to the impact of geopolitical tensions on their reputation,” the ECB explains. “This led to a deterioration in their liquidity situation.” There is no way that would offer a realistic chance of restoring liquidity. Russia is the majority owner of the bank.
Sberbank itself acknowledged that at several banks “within a very short period of time there was a significant outflow of customer deposits”. In some subsidiary banks, this has led to longer waiting times in the branches and in some cases to a restriction on the amount of daily cash withdrawals.
Top jobs of the day
Find the best jobs now and
be notified by email.
The bank said in a statement on Monday that it wanted to protect its customers and maintain critical functions. “We are making every effort and fully supporting the authorities to use their powers to manage this unprecedented situation in the interests of customers,” says Sonja Sarközi, CEO of Sberbank Europe.
According to its own statements, Sberbank Europe operates in eight countries in Central and Eastern Europe and has total assets of 13 billion euros. The institute looks after 800,000 customers, operates 187 branches and has more than 3,900 employees.
In response to the ECB’s assessment, the Austrian Financial Market Authority (FMA) temporarily suspended the business operations of Sberbank’s European subsidiary almost completely. As the FMA announced, the Vienna-based bank “is not allowed to make any payments, transfers or other transactions”.
The only exception to this payment moratorium is for depositors, who are allowed to withdraw EUR 100 per day to cover basic daily needs. The moratorium is limited to Tuesday (March 1), 11:59 p.m. The measure was justified with an imminent failure of the bank.
Deposits secured up to EUR 100,000
Sberbank Direct, a branch of Sberbank Europe, also collected money from savers in Germany and recently lured customers with interest payments of up to 1.5 percent. Around 35,000 German accounts with balances of around 1.1 billion euros are said to be affected.
Since the European subsidiary has its headquarters in Vienna, the Austrian deposit insurance would be responsible in the event of insolvency. The German financial regulator Bafin confirmed this again on Monday. “In the event of compensation, the Austrian compensation institution must immediately examine the compensation claims of the depositors and take the appropriate compensation measures,” the authority said. IIn the European Union, all deposits up to EUR 100,000 per customer and bank are protected.
The Czech National Bank has meanwhile taken the first steps to revoke the banking license of the Czech Sberbank subsidiary. The reason for this is also the bank’s liquidity problems due to the large outflow of deposits, a spokeswoman said. With an injunction, the branch was prohibited from granting new loans and accepting new deposits.
More on the Ukraine crisis:
In addition to Sberbank, the Russian VTB is also active in Europe and collects deposits from private customers in Germany with its subsidiary VTB Direktbank. The situation there is apparently not as critical as at Sberbank’s European subsidiaries.
“Due to the current situation, Bafin is in close contact with the bank,” said a spokesman for the German financial regulator. “Existing customers who are not subject to the sanctions can currently dispose of their credit within the framework of the contractual agreements.”
Because of the situation in Ukraine, Bafin has already intensified supervision of VTB Bank according to Handelsblatt information. One of the most important concerns of the financial regulator is to prevent funds from being transferred from VTB Bank in Europe to Russia.
VTB Bank Europe initially did not want to comment on request. According to the annual report, it recorded customer deposits of around 4.7 billion euros at the end of 2020. On the website, the institute also explains that money at VTB Direktbank is as safe “as at any other bank based in Germany”. In addition, deposits are secured up to at least EUR 750,000 per customer through membership in the deposit protection fund of German banks.
With agency material
More: Panic on bonds, ruble plummeting: Russian central bank doubles key interest rate to 20 percent