The European Central Bank (ECB) has announced that it expects Sberbank Europe will likely fail because of the EU’s latest sanctions against Russia.
According to the ECB, Sberbank’s European subsidiary and two other subsidiaries “are failing or likely to fail” due to “a deterioration of their liquidity situation”, Reuters reports.
The Austrian Financial Market Authority declared that it has imposed a moratorium on Sberbank Europe, which is based in Austria. The Deutsche Börse stock exchange operator announced it was halting trade in some Russian securities immediately, among them Sberbank and VTB Bank.
The announcements came as the EU imposed fresh sanctions and other measures against Russia in response to the country’s invasion of Ukraine.
Over the weekend, financial institutions analysed the likely effects of the new sanctions on Russia, notably the repercussions of the banning of large Russian banks from the SWIFT global payment system.
Large European banks down
New developments have resulted in 4.3% decline of shares of large banks in Europe.
Market instability came as Russian forces took two small cities in the southeast of Ukraine and the international response added to the economic and diplomatic isolation of Russia.
Banks that were hardest hit include those with large operations in Russia. The Austrian Raiffeisen Bank International dropped 18%, noting that it is working through the effects of the latest sanctions.
French Société Générale dropped 6.9%, Italian UniCredit fell 8%, while the German Deutsche Bank (DB), which opened a new office in Moscow in December, was down 7%. The latter issued a statement supporting the decisions of the German Government and its allies, promising to “consistently implement the sanctions.”
The ECB said its warning about the Russian majority-owned Sberbank extends to Croatia and Slovenia, where the bank has subsidiaries. Late on Sunday, the central bank of Croatia reported that it had imposed a two-day moratorium on Sberbank’s subsidiary there. The subsidiary stressed that it was doing everything in its power to protect its clients, their deposits and employees.
Sberbank itself acknowledged that it had experienced a “significant outflow of client deposits within a very short time” and that it was in close contact with market regulators.
The Deutsche Börse indicated that it has also dropped securities of the Russian Lukoil energy company and the Aeroflot flag carrier.