What Happened to the Russian Sberbank in Vienna after the Invasion of Ukraine?
The Russian bank Sberbank is one of the largest in Europe and has been hit hard by the European Union sanctions triggered by the Russian invasion of Ukraine. To find out what happened to its Vienna branch and whether it can continue to do business in Austria, read on.
The headquarters of Sberbank Europe, located at Schwarzenbergplatz 3 in Vienna. / Picture: © Wikimedia Commons, Sberbank Europe AG, CC BY-SA 4.0
The Russian bank Sberbank is one of the largest in Europe and has been hit hard by the European Union sanctions triggered by the Russian invasion of Ukraine. Now the question is what has become of its branch in Vienna, as the German/Austrian market was once an important business segment.
Sberbank is the largest financial institution in Russia and a multinational financial group with headquarters in Moscow. The bank, which is predominantly state-owned, holds almost one third of the assets of the Russian banking sector and the highest share of savings deposits in Russia.
However, it is not only active in Russia, but also around the world. Its international operations include the United Kingdom, the United States, the Commonwealth of Independent States, Central and Eastern Europe and Turkey. In 2014, it was the largest bank in Russia and Eastern Europe and the third largest in Europe.
A subsidiary of Sberbank, Sberbank Europe AG is headquartered in Vienna and made the headlines in the business news several times with the outbreak of the war in Ukraine. As a Russian state-owned company, Sberbank Europe AG was hit hard by the European Union sanctions and could not conduct business in the European region.
Previous crises of Sberbank Europe
Sberbank Europe has been in a sticky situation in the past. After the Russian annexation of Crimea, its parent company, Sberbank, was added to the European Union's sanctions list. Sberbank Europe managed to escape its fate for the time being, but the crisis still hurt its business.
In mid-2014, business collapsed dramatically as numerous investors withdrew a total of around 22 billion US dollars in capital for fear that the bank could be included on the sanctions list in the future. This was a serious setback for the company, but it was able to recover from it.
International Sanctions against Sberbank Europe
After the Russian invasion of Ukraine on 24 February 2022, the US government cut Sberbank off from its part of the international payments market. This time, in response to the unjustified invasion of Ukraine, both companies were sanctioned.
On 28 February 2022, the European Central Bank warned that Vienna-based Sberbank Europe AG was "likely" to become insolvent. As a result of the ECB warning, the Austrian Financial Market Authority (FMA) imposed a payment moratorium on the bank. This means that Sberbank Europe AG is not allowed to "carry out any disbursements, transfers or other transactions" until at least 1 March 2022, according to the Kurier. In short, it was prohibited from continuing its entire business operations with immediate effect.
Bad news for Sberbank Europe, but also for its investors, who were now confronted with great uncertainty. Around 35,000 customers hold deposits totalling 1 billion euros for Sberbank Europe AG, 913 million euros of which are secured. It was also emphasised that deposits of up to 100,000 euros continue to be secured by the European Deposit Guarantee Scheme.
"As a result of the transactions concluded, Sberbank Europe AG was able to repay in full to the ESA the deposit guarantee amount of 926 million euros, which was paid out to our customers by the Deposit Guarantee Scheme Austria (ESA).
Beyond the maximum protection amount of 100,000 euros per customer, our bank will now also pay out all remaining savings deposits in full to our customers," commented Sonja Sarközi, former CEO of Sberbank Europe AG and now liquidator of the company.
After many financial experts had already predicted a rapid insolvency of the company, the all-clear came at the beginning of May. By selling its loan receivables to other financial institutions, Sberbank Europe was able to repay the Deposit Guarantee Scheme Austria (ESA) the high three-digit million amounts with which it had compensated affected customers.
On 3 May, the company announced that insolvency had been averted through the sale of the asset portfolio and that the savings deposits of the institution were to be repaid in full. Now the bank is in liquidation.