Sberbank's European Arm Failing
The European Central Bank has determined that Sberbank Europe, a subsidiary of Russia’s state-owned banking giant, is “failing or likely to fail” following the imposition of Western sanctions. In response, Austrian authorities have frozen all withdrawals and transactions at the Vienna-based subsidiary until March 2 as they prepare for its probable bankruptcy.
- At the end of 2021, Sberbank Europe AG held total assets of €13.6 billion and served approximately 800,000 customers across Central and Eastern Europe through 187 branches. The Austrian parent company had about 65,000 customers, its Croatian subsidiary had 84,000, and the Slovenian subsidiary had 49,000. - The bank's failure was triggered by a rapid deterioration in its liquidity position due to significant deposit outflows. This bank run was a result of the reputational damage from geopolitical tensions following Russia's invasion of Ukraine, rather than an issue of negative equity. - The U.S. Treasury imposed sanctions that restricted Sberbank's access to the U.S. financial system, disrupting its ability to process U.S. dollar transactions for clients. Sberbank's parent company in Russia stated it was unable to supply liquidity to its European subsidiaries due to an order from Russia's central bank. - The Single Resolution Board (SRB), the EU's central resolution authority, orchestrated the sale of the Croatian and Slovenian subsidiaries to local banks, Hrvatska Poštanska Banka and Nova Ljubljanska Banka, respectively. This "sale-of-business" tool ensured the banks could continue operations without interruption for depositors. - The SRB determined that resolving the Austrian parent, Sberbank Europe AG, was not in the public interest, as its failure was not expected to harm financial stability. Therefore, it was placed into normal insolvency proceedings under Austrian law. - Retail depositors are protected by national deposit guarantee schemes, which cover eligible deposits up to €100,000 per depositor, per bank. The Austrian deposit guarantee scheme, which also covers the bank's German branch, was responsible for about €947 million in covered deposits for 26,000 depositors. - In a post-resolution valuation, the SRB concluded that shareholders of the resolved Croatian and Slovenian banks were better off under the resolution than they would have been in a standard insolvency. Consequently, the board decided that no compensation from the Single Resolution Fund was due to them.
