With sanctions from US, West, Russian Sberbank faces 'failure' in Europe, Ruble plummets

Sberbank and VTB banks are Russia's two largest state-run banks and own roughly half of the assets in the Russian banking system.

Published: 28th February 2022 07:38 PM  |   Last Updated: 28th February 2022 07:38 PM   |  A+A-

A satirical carnival float depicts Russia's President Vladimir Putin playing with the Ukraine to restore the Soviet Union on a square in Cologne, Germany. (Photo | AP)


BELGRADE: Faced with a rush of people withdrawing money, Sberbank and the Russian bank's subsidiaries in southeastern and central Europe are facing closures or takeovers following international sanctions imposed on Moscow for its invasion of Ukraine.

The European Central Bank said on Monday that Vienna-based Sberbank Europe AG and its branches in Slovenia and Croatia are failing or likely to fail after they "experienced significant deposit outflows" because of the impact to their reputation from the conflict.

"The bank is likely to be unable to pay its debts or other liabilities as they fall due,'' the ECB said.

Sberbank and VTB banks are Russia's two largest state-run banks and own roughly half of the assets in the Russian banking system.

They were targeted last week by tough US sanctions aimed at limiting their businesses internationally and over the weekend barred from the international SWIFT payment system.

In both Slovenia and Croatia, Sberbank temporarily closed its branches or limited cash withdrawals following a rush by its clients last week.

In Croatia, the bank's clients will be allowed to withdraw a maximum of about 1,000 euros per day over the next two days.

In Slovenia, the branches will be closed for the next two days and then the withdrawals will be limited to 400 euros per day.

Sberbank Europe AG also has subsidiaries in Bosnia, the Czech Republic, Hungary and Serbia, which do not come under the jurisdiction of the European Central Bank.

People's money is protected up to 100,000 euros per depositor in the European Union, including Slovenia, Croatia, the Czech Republic and Hungary.

In Serbia and Bosnia, local bank regulators guarantee up to 50,000 and 25,000 euros, respectively.

The Czech central bank said Monday that it was taking steps to revoke the banking license of Sberbank CZ, the Czech subsidiary.

The bank said the move was a result of “the bank's liquidity situation in the context of a significant outflow of deposits after the escalation of the conflict between Russia and Ukraine and Russia's attack on Ukraine.

" The Czech branches of Sberbank Europe were closed on Monday, with the bank citing a significant withdrawal of the deposits by clients in a short period of time.

Hungary's central bank has ordered two bank holidays at Hungarian branches of the Russian Sberbank, according to a Monday announcement by the Hungarian National Bank, or MNB.

During this period, customers will be able to use their credit cards but not be able to receive funds in their account, the national bank wrote.

The central bank is reviewing the state of the credit institution following the announcement of the possible insolvency of Sberbank.

According to the MNB, the situation has no effect on other members of the Hungarian financial institution system.

In Serbia, which has not joined Western sanctions against its ally Russia, the central bank said it is monitoring Sberbank's liquidity and promised to step in case of problems.

In Bosnia, the central banking agency said it is taking over the Sberbank's branch to protect the interests of its worried clients.

The U.S. Treasury Department on Monday announced new sanctions targeting the Russian central bank and state investment funds in the latest hard-hitting retaliation for the invasion of Ukraine.

The move was described as the most "significant action" that Treasury has taken against an economy of Russia's size, according to a senior administration official who briefed reporters on the sanctions on the condition of anonymity.

Biden administration officials said Germany, France, the UK, Italy, Japan, European Union and others will join the U.S. in targeting the Russian central bank.

"The unprecedented action we are taking today will significantly limit Russia's ability to use assets to finance its destabilizing activities, and target the funds Putin and his inner circle depend on to enable his invasion of Ukraine," Treasury Secretary Janet Yellen said in a statement.

Treasury said the move effectively immobilizes any assets of the Russian Central Bank in the United States or held by Americans.

The Biden administration estimated that the move could impact "hundreds of billions of dollars" of Russia funding.

U.S. governors are taking matters into their own hands and imposing their own economic sanctions on Russia for invading Ukraine.

Pennsylvania Gov. Tom Wolf on Sunday asked the Pennsylvania Liquor Control Board to remove Russian-sourced products from stores in the commonwealth.

He said the board has already identified Russian-sourced products currently being sold at Fine Wine & Good Spirits stores and urged for sales to cease as quickly as possible, WPXI-TV reported.

The board later responded that all Russian-made products will be removed from the stores' shelves as a show of solidarity and support for the people of Ukraine.

According to KDVR-TV, Gov. Jared Polis of Colorado on Thursday directed his state's Office of Information Technology and the Department of Personnel and Administration to look through current state contracts to see if there are any Russian state-owned companies currently doing business with Colorado.

Any found will be terminated.

On Saturday, Gov. Glenn Youngkin, of Virginia, ordered the Department of General Services to review all contracts to determine whether any state tax dollars were being spent on goods and services from primarily Russian companies, WRIC-TV reported.

Youngkin requested that the Norfolk Sister City Association, a non-profit citizen diplomacy organization, immediately end its relationship with Kaliningrad, Russia.

The Virginia Retirement System Board of Trustees and university endowment funds were also called to divest any and all holdings of the Russian ruble and any and all securities of Russian companies.

"I think we have to stand up and take every ounce of economic sanctions we haven't used, and we need the international community to come up with this and it's a big moment for the international community to stand up and say we won't allow this," said Youngkin at an event earlier this week in Hampton.

KXAN-TV reported that Texas Gov. Greg Abbott asked members of the Texas Restaurant Association, Texas Package Stores Association and Texas retailers to "voluntarily remove all Russian products from their shelves."

Elsewhere around the country, Ohio Gov. Mike DeWine directed the state's Commerce Department to cease the purchase and sale of Russian Standard, the only Russian vodka sold in Ohio (under the brand names Green Mark and Russian Standard).

New Hampshire Gov. Chris Sununu signed an executive order requiring state liquor outlets to remove Russian-made and branded alcohol, as did Utah Gov. Spencer Cox.

The UK's Chancellor of the Exchequer, Rishi Sunak, alongside the Bank of England on Monday announced the UK government's plans to impose further economic sanctions in response to the invasion of Ukraine by Russia by targeting the country's Central Bank of the Russian Federation (CBR).

The move, which the UK Treasury department said is in concert with the US and the European Union (EU), is aimed at preventing the CBR from deploying its foreign reserves in ways that undermine the impact of sanctions imposed by the west, and to "undercut" its ability to engage in foreign exchange transactions to support the Russian currency Rouble.

Under the plans, British people and businesses will be banned from making transactions with the Russian central bank, its finance ministry and its wealth fund.

"These measures demonstrate our determination to apply severe economic sanctions in response to Russia's invasion of Ukraine," Sunak said.

"We are announcing this action in rapid coordination with our US and European allies to move in lock step once more with our international partners, to demonstrate our steadfast resolve in imposing the highest costs on Russia and to cut her off from the international financial system so long as this conflict persists," the Indian-origin finance minister said.

The UK government said it will immediately take all necessary steps to bring into effect restrictions to prohibit any UK natural or legal persons from undertaking financial transactions involving the CBR, the Russian National Wealth Fund, and the Ministry of Finance of the Russian Federation.

"The Bank of England continues to take any and all actions needed to support the government's response to the Russian invasion of Ukraine," Andrew Bailey, the Bank of England Governor, said.

"We welcome the steps taken today by the UK government, in coordination with EU and US authorities, as an important and powerful demonstration of the UK's commitment to the international rule of law," he said.

The Treasury said the UK government intends to make further related designations this week, working alongside international partners.

Restrictions will also be imposed against Russian financial institutions.

It will cover measures to prevent Russian companies from issuing transferable securities and money market instruments in the UK, in addition to the prohibition of the Russian state raising sovereign debt in the UK already announced.

It will also grant power to prevent designated banks from accessing Pound Sterling and clearing payments through the UK.

Banks subject to this measure will be unable to process any payments through the UK or have access to UK financial markets.

Sunak's announcement also covers a set of measures to strengthen trade restrictions against Russia, including a prohibition against the export of a range of high-end and critical technical equipment and components in sectors including electronics, telecommunications, and aerospace.

There will also be an extension of financial and trade measures applying to Crimea to the DNR and LNR regions.

The UK government has said its sanctions are designed to "devastate" Russia's economy and target Russian President Vladimir Putin directly and his inner circle, including Foreign Minister Sergey Lavrov and several billionaire oligarchs known to be close to them.


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