Russia's Sberbank in Europe faces closure after savers demand money
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[February 28, 2022] By
Tom Sims and Alexandra Schwarz-Goerlich
FRANKFURT/VIENNA (Reuters) -The European
arm of Sberbank, Russia's biggest lender, faces failure, the European
Central Bank (ECB) warned on Monday, after a run on its deposits sparked
by the backlash from Russia's invasion of Ukraine.
Western allies have taken unprecedented steps to isolate Russia's
economy and financial system, including sanctioning its central bank and
excluding some of its lenders from the SWIFT messaging system, used for
trillions' of dollars of transactions.
Sberbank Europe and two other subsidiaries were set to fail, after
"significant deposit outflows" linked to "geopolitical tensions",
according to the ECB. Austria's Financial Market Authority imposed a
moratorium on Sberbank Europe, which is based in the country.
Separately, Deutsche Boerse, the German stock exchange operator, said
that it was suspending from trading a number of securities from Russian
issuers with immediate effect. The list includes Sberbank and VTB Bank.
"We've triggered a run on this kind of bank," said Hans-Peter Burghof, a
professor at the University of Hohenheim.
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Banks and their lawyers are scrambling to assess the impact of the wave
of sanctions, which prompted Russia's central bank to more than double
its main interest rate on Monday and introduce some capital controls to
try and stabilize the rouble.
British bank HSBC is beginning to wind down relations with a host of
Russian banks including the second-largest, VTB, according to a memo
seen by Reuters, as financial institutions start to implement
restrictions on Russia.
Shares of leading banks sank with the European banking sector down 5.9%,
steeper than a 2.4% fall for the Euro Stoxx index.
The market turmoil came as Russian invasion forces seized two small
cities in southeastern Ukraine and the area around a nuclear power
plant, as Moscow's diplomatic and economic isolation deepened. Russia
calls its actions in Ukraine a "special operation".
The banks with significant operations in Russia were hit the hardest.
Austria's Raiffeisen Bank International fell 13.8% as it said it was
working through the impact of sanctions.
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The logo of Sberbank Europe is seen on the roof of its headquarters
in Vienna, Austria, September 4, 2016. REUTERS/Heinz-Peter Bader
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"Our Russian subsidiary bank has a very strong liquidity position and is
recording inflows," RBI's chief executive Johann Strobl said in a statement to
Reuters.
Societe Generale lost 11%, and UniCredit was 11.8% lower.
Investors fear that European banks with heavy exposure to Russia and Ukraine
will need to make hefty provisions for the drop of the valuation of their assets
in the region.
Germany's Deutsche Bank, which opened a new Moscow headquarters in December, was
down 8.7%. It said it would implement sanctions.
The ECB's warning extended to Sberbank subsidiaries in Croatia and Slovenia.
Sberbank is majority owned by Russia.
The lender said in a statement that several of its subsidiaries saw "significant
outflow of client deposits within a very short time" and that it was in close
contact with regulators.
Sberbank's branches in Slovenia were closed until Wednesday and services
temporarily limited to card transactions with a withdrawal limit of 400 euros a
day, the Slovenian central bank said on Monday.
The Croatian central bank said depositors at Sberbank, which has about a 2%
share of the country's banking market, would be allowed to withdraw just under
1000 euros a day.
Sberbank Europe said in November it had reached a deal to sell its subsidiaries
in Croatia, Slovenia, Hungary, Serbia and Bosnia and Herzegovina to a group
including Serbia's AIK bank. Serbian regulators gave their consent on Monday,
the only ones yet to do so.
Meanwhile, the Russian securities dropped by Deutsche Boerse also include Lukoil
and Aeroflot.
Euroclear said is has closed its link to rival settlement house Clearstream
Banking for settling trades in Russian securities in response to European Union
financial sanctions.
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Depository receipts of Russian companies and banks, other than VTB, were still
trading on the London Stock Exchange, with Sberbank down 70%. The LSE declined
to comment.
(Reporting by Tom Sims, Alexandra Schwarz-Goerlich, Lawrence White, Kirsten
Donovan, Daria Sito-Sucic, Huw Jones, and Frank Siebelt; editing by Carmel
Crimmins and Frank Jack Daniel)
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