Sberbank Europe to be sold, wound down after run on deposits

Vienna

EUROPE is winding down and selling units of Sberbank of Russia PJSC's business in the region after regulators said they were likely to fail in the wake of sanctions imposed over Russia's invasion of Ukraine.

The Single Resolution Board (SRB), which handles European lenders that run into trouble, said it has decided to transfer all shares in the bank's Croatian and Slovenian subsidiaries to other firms in those countries. The Austrian unit, known as Sberbank Europe AG, will be wound down under local insolvency procedures.

The US and European Union are ramping up measures against Russia by blocking some of the nation's banks from various parts of the global financial system. Already last week, the US said it was sanctioning five of Russia's largest banks, including Sberbank and VTB Bank PJSC. While Sberbank in Europe accounts for only a fraction of the lender's overall business, its shuttering is a further blow to Russia.

The SRB on Monday had suspended most payments at three of the bank's divisions after the European Central Bank determined that Austria-based Sberbank Europe and the subsidiaries in Croatia and Slovenia probably won't be able to pay their debts or other liabilities.

Hrvatska Postanska Banka, the only major bank in Croatia that is state-owned, will acquire Sberbank's business in that country while Nova Ljubljanska Banka assumes the Slovenia operations.

The units in the two countries will open on Wednesday (March 2) "as normal with no disruption to depositors or clients", the SRB said. "They are now part of well-established, robust and stable banking groups."

Austria's financial markets regulator said it has prohibited Sberbank Europe from continuing to do business. That triggers compensation for clients, giving the country's guarantee system 10 banking days to pay out as much as 100,000 euros (S$150,486) per depositor.

Sberbank decided to withdraw from the European market after facing a run on deposits, Russia's largest lender said in a statement on its website.

The bank wasn't able to supply liquidity to its subsidiaries after an order from the Russian central bank, yet local assets are sufficient to make payouts to all depositors, Sberbank said.

Sberbank Europe, which reported 13.6 billion euros of assets, has said it was cooperating with regulators and was part of deposit-insurance plans in all countries of operation.

In Austria, about 1.1 billion euros of deposits are currently covered, predominantly among German clients, according to that country's insurance plan.

The European Commission said in a separate statement that Czech authorities have decided to close and wind down Sberbank's unit in that country, with depositors eligible for the same statutory compensation as in Austria.

Regulators in Hungary also ordered the wind-down of Sberbank's unit in Budapest, while the Czech central bank had also signalled similar plans earlier.

Until now, depositors had been able to withdraw a daily amount determined by authorities in the three European countries.

National authorities announced detailed limits, with Austrian regulators imposing a 100 euro daily withdrawal limit and halting most other transactions. BLOOMBERG

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