Sberbank pulls out of Europe as Austrian entity fails

Sberbank has announced it has been forced to pull out of the European market, after it said it faced large outflows of cash in the region as well as threats to the safety of its employees and branches.

The bank, Russia’s biggest lender, said its European subsidiaries had faced “abnormal cash outflows”, meaning it could no longer supply them with liquidity. However, Sberbank said it had sufficient capital to be able to make payments to all of its depositors.

Sberbank has been operating in Germany, Austria, Croatia, and Hungary among other countries, and had European assets worth €13 billion (£10.8 billion) at the end of 2020.

The Austrian unit of Sberbank has been pushed into failure by far-reaching sanctions on Russia, becoming the first banking victim of the measures after they caused a run on the bank and left its parent unable to help.

Following the Austrian unit’s collapse, which came as other parts of Sberbank’s EU operations were offloaded in emergency sales to local rivals or wound down, the state-owned lender said it was withdrawing entirely from Europe.

The EU authority responsible for restructuring failing banks said the demise of the most troubled European units of Sberbank, Russia’s biggest lender, had come at “lightning speed”.

Sberbank Europe has about 800,000 retail and corporate customers in central and eastern Europe with almost 4,000 staff.

The bank said in a statement on Wednesday that its EU subsidiaries had “faced an exceptional outflow of funds and a number of safety concerns regarding its employees and offices”, adding that it “cannot provide liquidity” to its European operations due to a ban by Russia’s central bank on moving funds abroad.

“In light of the current situation Sberbank has taken the decision to withdraw from the European market,” it said.

Late on Tuesday the EU’s Single Resolution Board announced that the Austrian subsidiary was going into insolvency while its Croatian and Slovenian units had been transferred to new owners.

The SRB had already suspended most EU activities of the state-owned Russian bank this week after customers rushed to withdraw money in response to western sanctions.

“We had been monitoring the situation for some time,” said Elka König, the SRB chair. “But the failing of this institution came at lightning speed.” She added: “It’s not an insolvency due to negative equity, it’s an insolvency due to lack of liquidity.”

König said she was confident the Austrian subsidiary’s assets were sufficient to repay its €1 billion of deposits, but it was unclear if they would cover all liabilities.

Many of the 35,000 private depositors at the Austrian subsidiary of Sberbank are based in Germany but are covered by Austria’s deposit guarantee scheme. Sberbank’s German business will be part of the Austrian insolvency, but its Swiss operation continues to operate.

When asked if other Russian banks with operations in Europe — notably VTB and Gazprombank — could face similar problems, König said the eurozone financial system was stable “for the time being” but “clearly banks that have a Russian ownership are under stress”.