12° Nicosia,
22 September, 2023

Russian bank subsidiary in Europe collapses

Sberbank Europe now bankrupt as ruble continues to fall

Kathimerini Greece Newsroom

While the Moscow Stock Exchange remains closed for a third straight day and the ruble is losing value inside and outside Russia, heading back to Monday's record low again, the ECB yesterday confirmed the first bankruptcy of a subsidiary in Europe caused by sanctions and massive withdrawals. 

The bank is Sberbank Europe which is based in Austria, which collapsed after massive cash withdrawals. The Single Bank Settlement Board (SRB) announced yesterday that the bank's assets will be liquidated under existing legislation, while the shares of its subsidiaries in Croatia and Slovenia will be transferred to other companies in those countries.

Although Sberbank Europe represents a very small share of the activities of its parent company Sberbank Russia, its collapse is a blow to Russia, which is now in a state of disarray, as it is being pounded by sanctions and abandoned by companies.

In Croatia, the assets of the Sberbank subsidiary will be transferred to the country's only state-owned bank, Hrvatska Postanska Banka, and in Slovenia to Nova Ljubljanska Banka.  While trying to reassure both banks' clientele, the SRB announced yesterday that "the subsidiaries in both countries have opened and are operating normally without any problems with regard to their clients' deposits".

From the Russian side, the parent company Sberbank Russia stated on its website that it decided to leave the European market because it faced massive deposit withdrawals.  It pointed out that the parent bank could not provide the required liquidity to the subsidiaries due to a ban imposed on the central bank of Russia, but the assets of the subsidiary were sufficient to pay all depositors.

Meanwhile, in the Moscow foreign exchange market, the ruble fell by 4% yesterday, reaching 105.20 rubles to the dollar and 117.90 rubles to the euro. It also fell in markets outside Russia with its exchange rate reaching 112 rubles to one dollar on the online trading platform EBS. However, it remained at levels higher than what it was on Monday, falling to 120 rubles to one dollar. The Russian currency has been declining almost non-stop since the beginning of the Russian invasion of Ukraine on February 24, and at some point lost 1/3 of its value in the Moscow market. To halt its decline and support Russia's faltering economy, the central bank more than doubled interest rates from 9 to 20%

At the same time, there are growing assessments about the risk of default on Russia's debt due to sanctions. Following the International Financial Institute (IIF), US investment firm JP Morgan warned yesterday that sanctions increase the likelihood that Russia will not repay its debt in dollars and, more generally, bonds it has issued in international markets. "US sanctions and Russian retaliation for restricting payments to foreigners, as well as cutting off its banks from international payment chains, make it extremely difficult to repay its bonds abroad," she said in a note to her clientele. It should be noted that Russia has to pay $ 700 million in debt payments within the month, most of which provide for a 30-day grace period.

As for the Russian gas pipeline operator Nord Stream 2, however, yesterday it hastened to refute reports in the international press about its bankruptcy after the imposition of US sanctions. In a statement, Switzerland-based Nord Stream 2 said yesterday that it "simply informed local authorities that it had to terminate its contracts with its employees after US sanctions were imposed".

Cyprus  |  Ukraine  |  Russia  |  sanctions

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