Europe shut down Sberbank of Russia PJSC’s main businesses in the bloc because regulators thought they were going to fail after sanctions were put in place because of Russia’s attack on Ukraine.
The Single Resolution Board, which is in charge of European lenders that get into trouble, put a hold on payments, enforcement, and termination rights for three Sberbank divisions until March 1. Sberbank Europe AG is based in Austria, and it has branches in Croatia and Slovenia. The European Central Bank thinks they won’t be able to pay their debts or other liabilities when they come due.
Sberbank Europe and its subsidiaries lost a lot of money because of the reputational damage caused by geopolitical tensions, the European Central Bank said in a statement. This led to a decrease in its ability to pay its debts. And there aren’t any steps that can be taken at the group level or in each of the company’s branches in the banking union to fix this.
Some of Russia’s banks have been blocked from the international SWIFT transaction messaging system, which is used for trillions of dollars worth of transactions all over the world. This move by the U.S. and the European Union has made things more complicated for lenders. As soon as last week, the U.S. said that it was going to put sanctions on five of Russia’s biggest banks, such as Sberbank and VTB Bank PJSC.
On Monday, the German financial watchdog said that it’s paying close attention to the situation. Deposit withdrawals haven’t been as bad as at Sberbank, a person who knows the situation says. So far, regulators haven’t taken any more serious action.
People who work for Sberbank Europe say they work with regulators and are part of deposit insurance plans in all the countries where they work. Deposits in Austria are currently covered by the country’s insurance plan, which says that about 1.1 billion euros of them are covered.
Sanctions are making it hard to come up with solutions like selling the unit or winding it down, say people who know the situation.
Statement: “We are doing everything we can to help authorities use their powers so they can deal with this unique situation.” Sonja Sarkoezi, CEO of Sberbank Europe, said in the statement.
For now, depositors will be able to take out a certain amount each day, set by the governments of the three European countries. National governments have set very specific limits, with Austrian regulators setting a daily withdrawal limit of 100 euros ($111) and stopping most other transactions.
In Hungary, Sberbank was told to stay closed for two days while the central bank looked into its situation. Customers can still use bank cards to make purchases, but they won’t be able to wire money.
The Czech Republic started a process on Monday to get rid of the banking licence of Sberbank in the country. This is what the central bank said: It doesn’t think this will have an effect on how stable the Czech financial sector is.
Updates on VTB’s situation are in the fifth paragraph, and insured deposits are in the sixth.