Reuters: Russia-based Sberbank faces closure in Europe

Western allies have taken unprecedented steps to isolate Russia's economy and financial system including sanctioning its central bank and excluding some of its lenders from the SWIFT messaging system, used for trillions'of dollars of transactions. Sberbank Europe and two other subsidiaries were set to fail, after ‘significant deposit outflows’ linked to ‘geopolitical tensions’, according to the ECB. Austria's Financial Market Authority imposed a moratorium on Sberbank Europe, which is based in the country. 

Separately, Deutsche Boerse, the Germany-based stock exchange operator, said that it was suspending from trading several securities from Russia-based issuers with immediate effect. The list includes Sberbank and VTB Bank.

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 (28 February 2022) and introduce some capital controls to try and stabilize the rouble.

UK-based HSBC is beginning to wind down relations with a host of Russian banks including VTB, according to a memo seen by Reuters, as financial institutions start to implement restrictions on Russia. 

Shares of leading banks sank with the Europe-based banking sector down 7%, steeper than a 2.5% fall for the Euro Stoxx index.

The banks with significant operations in Russia were hit the hardest. Austria-based Raiffeisen Bank International fell 13.8% as it said it was working through the impact of sanctions. Societe Generale lost 11.1%, and UniCredit was 9.7% lower.

Investors fear that Europe-based banks with heavy exposure to Russia and Ukraine will need to make hefty provisions for the drop of the valuation of their assets in the region, Reuters states.

Germany's Deutsche Bank, which opened a new Moscow headquarters in December 2021, was down 9.5%. It said it would implement 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 saw ‘significant outflow of client deposits within a very short time’ and that it was in close contact with regulators.

Sberbank's branches in Slovenia were closed until Wednesday (23 February 2022) and services temporarily limited to card transactions with a withdrawal limit of EUR 400 a day, the Slovenia-based central bank said on 28 February 2022.

The Croatia-based central bank said depositors at Sberbank, which has about a 2% share of the country's banking market, would be allowed to withdraw just under EUR 1000 a day.

Sberbank Europe said in November 2021 it had reached a deal to sell its subsidiaries in Croatia, Slovenia, Hungary, Serbia, and Bosnia and Herzegovina to a group including Serbia-based AIK bank. Serbian regulators gave their consent on Monday (28 February 2022), the only ones yet to do so.

Meanwhile, Russia-based securities dropped by Deutsche Boerse also include Lukoil and Aeroflot.

Euroclear said it has closed its link to rival settlement house Clearstream Banking for settling trades in Russia-based securities in response to European Union financial sanctions, Reuters concluded.