Russia’s Sberbank in Europe faces closure after savers ask for cash

  • ECB says Sberbank Europe ‘fails or is likely to fail’
  • Major European banks fall sharply in early trading
  • Deutsche Boerse quits trading Sberbank and others

FRANKFURT/VIENNA/SARAJEVO, Feb 28 (Reuters) – The European branch of Sberbank (SBER.MM), Russia’s biggest lender, is at risk of bankruptcy, the European Central Bank (ECB) warned on Monday, after a run on its deposits triggered by the backlash of 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 barring some of its lenders from the SWIFT messaging system, used for billions of dollars in transactions.

Sberbank Europe and two other subsidiaries were doomed to bankruptcy, after “significant outflows of deposits” linked to “geopolitical tensions”, according to the ECB. The Austrian Financial Markets Authority has imposed a moratorium on Sberbank Europe, which is based in the country. Read more

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Separately, Deutsche Boerse (DB1Gn.DE), the German stock exchange operator, said it was suspending trading in a number of securities from Russian issuers with immediate effect. The list includes Sberbank.

“We triggered a run on this type of bank,” said Hans-Peter Burghof, a professor at the University of Hohenheim.

Western 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 capital controls to try to stabilize the ruble . Read more

The Russian central bank is ready to support the country’s banking sector following the strong demand for liquidity, its governor Elvira Nabiullina has said. Read more

Shares of major European banks fell with the European banking sector (.SX7P) down 5.4%, larger than a 1.9% decline for the Euro Stoxx index (.STOXXE).

The market turmoil came as ceasefire talks between Russian and Ukrainian officials began on the Belarusian border on Monday and Russia faced growing economic isolation four days after invading the Ukraine. Russia calls its actions in Ukraine a “special operation”. Read more

European banks with significant operations in Russia were the hardest hit on Monday. Austria’s Raiffeisen Bank International (RBIV.VI) fell 13.8% as it said it was working on the impact of sanctions. Read more

“Our Russian banking subsidiary has a very strong liquidity position and is seeing inflows,” RBI chief executive Johann Strobl said in a statement to Reuters.

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 had seen “a significant outflow of customer deposits in a very short period of time” and that it was in close contact with regulators.

Sberbank branches in Slovenia were closed until Wednesday and services temporarily limited to card transactions with a withdrawal limit of 400 euros per day, the Slovenian central bank said on Monday.

The problem disrupted the payment of government benefits through Sberbank. Some 1,000 child protection payments have been rejected, according to the country’s Labor Department.

Croatia’s central bank said depositors at Sberbank, which owns around 2% of the country’s banking market, would be allowed to withdraw just under €1,000 a day.

Sberbank Europe announced in November that it had reached an agreement to sell its subsidiaries in Croatia, Slovenia, Hungary, Serbia and Bosnia and Herzegovina to a group including Serbian bank AIK and Slovenian bank Gorenjska.

Serbian regulators gave their approval on Monday, the only ones to have done so yet. Gorenjska said that it is no longer viable to proceed with the acquisition of the Slovenian subsidiary of Sberbank in the current situation.

Sberbank certificates of deposit on the London Stock Exchange fell by 70%.

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Reporting by Tom Sims, Alexandra Schwarz-Goerlich, Lawrence White, Kirsten Donovan, Daria Sito-Sucic, Huw Jones and Frank Siebelt; edited by Carmel Crimmins and Frank Jack Daniel

Our standards: The Thomson Reuters Trust Principles.

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