Sberbank difficulties in Europe and consequences for account holders

As one of the first consequences of financial sanctions on Russia, European branches of Sberbank face failure after customers withdrew their money and financial markets lost confidence. As such, several European countries restrict financial operations from account holders for at least two days.

The European Central Bank assessed Sunday that Sberbank Europe AG in Austria and its subsidiaries in Croatia and Slovenia “are failing or likely to fail” because its “liquidity situation has deteriorated”.

It follows the financial sanctions applied on Russia after its invasion of Ukraine as customers and financial markets withdrew their trust in Sberbank.

Sberbank Europe AG is a retail bank subsidiary fully owned by Sberbank, whose majority shareholder is the Russian Federation. It is as such affected by the sanctions imposed on the country after its invasion of Ukraine.

As a consequence, the bank is likely to be unable to pay its debts or other liabilities as they fall due, the ECB said in a statement on Monday.

Because confidence in Russian banks declined, the subsidiary “experienced significant deposit outflows” and the ECB considers there is “no realistic chance” that the group would be able to restore its position.

The situation for the bank is particularly difficult in the Czech Republic and Croatia.

Deposits in Sberbank bank accounts in the E.U. guaranteed for up to €100,000

The Single Resolution Board has therefore applied a suspension of operations until Wednesday.

During this moratorium, the bank isn’t able to conduct outgoing payments, credit transfers, or other transactions for its entities operating in the eurozone. The SRB is responsible for restructuring failing banks in the euro area with minimum impact on the economy and public finances.

Sberbank Europe AG reported 13.6 billion euros (US$15.3bn) in total assets in Europe at the end of 2021. The group has 185 local branches in Austria, Germany, Croatia, Slovenia, Czech Republic, Hungary, Bosnia and Herzegovina and Serbia. It employs 3,933 people.

As the SRB works on restructuring the bank, the future of the jobs remains uncertain and European customers of the bank are affected by the probable failure.

But if the bank goes bankrupt, customers will not lose all their money. With the Deposit Guarantee Schemes, retail depositors across the European Union are protected up to €100,000 ($112,700) per depositor per bank operating in the E.U. The DGS is a fund financed by banks operating in the E.U. that ensures that individual and company savings and deposits for up to €100,000 are safe.

The SRB also allows depositors of the euro area to withdraw a daily allowance amount determined by each national financial authority.

€100 per day maximum in Austria and Germany, €400 in Slovenia

As a consequence, Slovenians with a bank account in Sberbank are for now restricted to €400 per day via card payment or cash withdrawal until Wednesday. Only card operations – no transfer – are possible. The Bank of Slovenia decided to close the doors of the branch on Monday and Tuesday. Finance Minister of Slovenia said in a statement he supported ECB’s move. Sberbank has a 2% market share in Slovenia but the Central Bank emphasized it was the only Russian bank operating in the country.

The Czech National Bank launched steps towards the revocation of the banking license of Sberbank CZ, and restricts the bank from disposing of assets and liabilities, issuing new loans and accepting deposits. The CNB didn’t set restrictions to account owners and was already explaining the process to receive the funds guaranteed by the E.U.

In Austria, the Austrian Financial Authority Market said eligible depositors in the country will have access to an amount of a maximum of €100 per day to “cover their most necessary daily requirements until the end of the moratorium”.

Similarly, the 65,000 customers of Sberbank Direct in Germany will be able to spend up to €100 a day from their accounts. The bank totals €3.64bn in assets in the country. The branch explained on its website the sanctions triggered a significant outflow of deposits which particularly hit the institution in the Czech Republic and Croatia. The financial market also lost confidence in Sberbank which lost access to US dollars anymore even though U.S. sanctions aren’t in force yet.

Part of the E.U. but not the euro area, Croatia will allow depositors – citizens and companies – to dispose of up to HRK 7,280 (€962) per day.

In Hungary, people will be able to transact and pay with their cards. The Central Bank didn’t mention a limit on payments. They will however not have access to cash operations and will not receive or send funds via bank account transfers. The local branches will also close for two days to review the bank’s financial situation.

Outside of the European Union, the national bank of Serbia informed that Sberbank Srbija operated as an independent national entity and was “highly liquid and well capitalized”. Serbia guarantees both dinar and foreign currency deposits in banks for up to €50,000.

Despite being owned by Sberbank Austria, the Central Bank of Bosnia and Herzegovina said the sanctions didn’t cover Sberbank in the country. It stated that “there is no need to terminate business relations with any bank in Bosnia and Herzegovina“.

ECB assesses that Sberbank Europe AG and its subsidiaries in Croatia and Slovenia are failing or likely to fail, ECB, February 2022, Free accessCNB launches steps to revoke the licence of Sberbank CZ, Czech National Bank, February 2022, Free accessSberbank Europe AG unter Moratorium bis zum Ende des 1. März 2022, Sberbank Direct Germany, February 2022, Free accessKét bankszünnap a magyar Sberbanknál, az MNB áttekinti a hitelintézet helyzetét, Hungary Central Bank, February 2022, Free accessFMA imposes a moratorium upon “Sberbank Europe AG, Austria Financial Market Authority, February 2022, Free accessPoslovanje slovenske Sberbank banke v ponedeljek in torek omejeno, Central Bank of Slovenia, February 2022, Free accessZajedničko saopštenje CBBiH, AOD i agencija za bankarstvo FBiH i RS, Bosnia and Herzegovina Central Bank, February 2022, Free accessSberbank Srbija highly liquid and well capitalized, National Bank of Serbia, February 2022, Free access

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