ECB and BaFin: Consumer report on Sberbank Europe AG and its subsidiaries in Croatia and Slovenia

The German Federal Financial Supervisory Authority (BaFin) issued a consumer notification regarding Sberbank Europe AG on 28 February 2022. The European Central Bank (ECB) has also issued a press release in relation to Sberbank Europe AG, with its headquarters in Austria and its subsidiaries in Croatia and Slovenia, classifying the bank as "failing" or "likely to fail". The Single Resolution Board (SRB) has issued a moratorium which expires at 23:59 on 1 March 2022.

Background and measures

Against the background of the geopolitical conflict, there are the first effects on European subsidiaries of Russian banks. Following the moratorium issued by the Single Resolution Board (SRB), which the Austrian Financial Market Authority (FMA) is responsible for implementing, there is a ban on disposals and payments. The reason for the moratorium is the deterioration of the liquidity situation of Sberbank Europe AG and its subsidiaries (Sberbank Croatia and Sberbank banka in Slovenia). The branch in Frankfurt am Main, Sberbank Direct, is also affected. Sberbank is a wholly owned subsidiary of the public joint-stock company Sberbank of Russia, in which the Russian state holds a majority stake, and had assets worth EUR 13.6 billion at the end of 2021.

Following the decision to impose comprehensive financial sanctions against Russia, Russia was, among other things, excluded from the SWIFT banking communication system. Although Public Joint-Stock Company Sberbank of Russia (PJSC) has not been affected by this so far, it has been sanctioned by the U.S. Treasury Department and cannot make payments in the U.S. financial system. Furthermore, the reserves of the Russian Central Bank, which are largely located in the Eurozone, were frozen. The moratorium is the consequence of the substantial withdrawal of deposits from Sberbank Europe AG,.which the ECB attributes to reputational damage. The SRB also announced that it will not seek to rehabilitate the banks due to lack of public interest. Sberbank will leave the European market, the FMA has determined the compensation case./p>

Exceptions

As the only exception, the moratorium provides for depositors of eligible deposits to withdraw up to EUR 100 per day to secure the most necessary daily needs. Based on the deposit guarantee requirements of the European Union, deposits of private investors up to EUR 100,000 are protected by the Austrian deposit guarantee scheme. The legal requirements are met if the FMA determines the compensation case. The FMA acts on behalf of the Single Resolution Board (SRB) in Brussels.

German depositors

The legal requirements in the event of compensation also apply to German depositors of the Sberbank Direct branch in Frankfurt am Main, i.e. the Austrian compensation scheme must immediately examine the individual case and take appropriate measures. As a rule, the German settlement institution has to carry out the payment and the claims of the depositors within seven working days (after the determination of the compensation).

 

Consequences for the financial market

In addition to retail depositors, businesses will also be affected by the default. Thus, borrowers will probably no longer be able to make further drawings under existing loan agreements. This can lead to significant financial consequences. Our Financing & Financial Regulation practice group has experience in restructuring processes and will be happy to answer any queries.

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