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

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

FRANKFURT/VIENNA, 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 caused 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 and VTB Bank (VTBR.MM).

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

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

Britain’s HSBC (HSBA.L) is beginning to end its relationship with a slew of Russian banks, including the second-biggest, VTB, according to a memo seen by Reuters, as financial institutions begin to put restrictions in place on Russia. Read more

Shares of major banks fell with the European banking sector (.SX7P) down 7%, bigger than a 2.5% drop for the Euro Stoxx index (.STOXXE).

The market turmoil came as invading Russian forces seized two small towns 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”. Read more

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

Societe Generale (SOGN.PA) lost 11.1% and UniCredit (CRDI.MI) lost 9.7%.

Investors fear that European banks with high exposure to Russia and Ukraine will be forced to build up heavy provisions for the fall in the valuation of their assets in the region.

Germany’s Deutsche Bank (DBKGn.DE), which opened a new Moscow headquarters in December, lost 9.5%. He said he would apply 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 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.

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. Serbian regulators gave their approval on Monday, the only ones to have done so yet.

Meanwhile, Russian stocks dropped by Deutsche Boerse also include Lukoil (LKOH.MM) and Aeroflot (AFLT.MM).

Euroclear said it cut its tie with rival settlement firm Clearstream Banking for settling trades in Russian securities in response to European Union financial sanctions.

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Reporting by Tom Sims, Alexandra Schwarz-Goerlich, Kirsten Donovan, Daria Sito-Sucic; Frank Siebelt; edited by Jason Neely and Carmel Crimmins

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