ECB Banking Supervision
Subsidiaries of the Russian Sberbank are threatened with bankruptcy
The Sberbank logo on a branch in Russia. Photo: Peter Kneffel/dpa
© dpa-infocom GmbH
The financial sanctions against Russia are having an effect: investors are withdrawing funds from Sberbank’s subsidiaries on a large scale. The European branches of the institute will probably not survive.
The ECB banking supervisor considers the viability of the European subsidiaries of the Russian Sberbank to be seriously endangered due to the effects of the financial sanctions.
The European Central Bank has come to the conclusion that Sberbank Europe AG, headquartered in Vienna, and its two subsidiaries in the banking union, Sberbank dd in Croatia and Sberbank banka dd in Slovenia, “will fail or will likely fail”, the ECB said the night of Monday with. The ECB Banking Supervision uses this wording to identify institutions that it believes are no longer viable.
“Sberbank Europe AG and its subsidiaries experienced significant outflows of deposits as a result of the impact of geopolitical tensions on their reputation,” the ECB said. “As a result, their liquidity situation has deteriorated. In addition, there are no measures available that have realistic prospects of restoring this position at group and individual subsidiary level in the Banking Union.”
Withdraw only 100 euros per day
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, 11:59 p.m. The measure was justified with an imminent failure of the bank.
Sberbank Europe is a 100 percent subsidiary of the majority state-owned Sberbank in Moscow. In a statement, the company in Vienna emphasized its cooperation with the supervisory authorities. “We are making every effort and fully support the authorities so that they can use their powers to master this unprecedented situation in the interests of customers,” said Sberbank Europe boss Sonja Sarközi according to the announcement. She pointed out that several banks in the group had “recorded a significant outflow of customer deposits within a very short time”, which is why daily cash withdrawals were partially restricted.
The moratorium follows the decision to impose sweeping financial sanctions on Russia over the attack on Ukraine. Sberbank Europe says it has 187 branches with 3,800 employees and around 773,000 customers in Central and Eastern Europe, including 65,000 customers in Germany and Austria.
Deposits from private investors are legally protected in the EU up to an amount of EUR 100,000 per depositor and bank. The ECB explained that this protection is provided by the deposit guarantee systems in Austria, also for the bank’s branches in Germany, as well as in Croatia and Slovenia.
The German financial regulator Bafin confirmed that deposits from German depositors at the branch in Frankfurt am Main (“Sberbank Direct”) are protected by the Austrian deposit insurance. “In the event of compensation, the Austrian compensation institution must immediately examine the depositor’s compensation claims and take the appropriate compensation measures,” said the Federal Financial Supervisory Authority (Bafin). “In the event of compensation, the German compensation institution is responsible for making the payments and usually has to meet the depositor’s claims within seven working days of determining the compensation event.”
The ECB has been directly supervising the largest banks and banking groups in the euro area since November 2014. There are currently 115 institutes that represent almost 82 percent of the market in the currency area of the 19 countries.