SHARE
COPY LINK

UKRAINE

Austria-based Russian bank declared insolvent due to sanctions

The Austria-based European subsidiary of Russia's Sberbank will be wound up after coming under pressure from Western sanctions levelled against the bank in response to Moscow's invasion of Ukraine, European banking regulators said Tuesday.

The European arm of Russia's Sberbank is entering administration. Photo: Jure Makovec / AFP
The European arm of Russia's Sberbank is entering administration. Photo: Jure Makovec / AFP

The Austrian subsidiary of Russia’s biggest lender Sberbank Europe AG would be allowed to enter “normal insolvency proceedings” while branches in Croatia and Slovenia were sold to local banks, the Single Resolution Board, part of the European Union’s system to maintain financial stability, said in a statement.

Depositors at the Austrian subsidiary would be protected up to 100,000 euros ($111,265), in line with European legislation, while those in Croatia and Slovenia would be covered “with no limits”.

Sberbank AG suffered financing issues following the announcement of tough European Union sanctions aimed at choking off Russian banks’ access to capital markets.

READ MORE: Swiss-based Nord Stream 2 declared insolvent due to Russia sanctions

The European Central Bank reported Monday that the European affiliate was “failing or likely to fail” after it “experienced significant deposit outflows as a result of the reputational impact of geopolitical tensions”.

Support for the Austrian subsidiary from its parent was not possible since the Russian central bank prohibits financial institutions from sending cash to countries that have imposed sanctions.

Sberbank Europe AG — which is 100 percent owned by the bank’s Russian parent company — also has subsidiaries in Bosnia and Herzegovina, the Czech Republic, Hungary and Serbia, which are not overseen by European regulators.

UPDATED: How Austria could be impacted by the war in Ukraine

In the case of the Austrian subsidiary, the SRB determined letting the bank fail would “not have a negative impact on financial stability”.

The subsidiaries in Croatia and Slovenia would open again as normal on Wednesday.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

UKRAINE

REVEALED: What is Austria’s emergency plan if Russia cuts gas supply?

Amid fears about what would happen if gas supplies to Austria were disrupted, the Federal Government has put together a package of measures to create a strategic gas reserve.

REVEALED: What is Austria's emergency plan if Russia cuts gas supply?

It has been well reported that Austria is heavily reliant on Russian natural gas – but what would happen if supplies were suspended or stopped altogether?

Austria sources 80 percent of its gas from Russia, so the country would be seriously impacted if supplies were disrupted due to the war in Ukraine, a breakdown of diplomatic relations or any other unforeseen event. 

This is why the Federal Government has now unveiled a package of measures to protect Austria’s gas reserves in the event of an energy emergency.

READ MORE: ‘An unprecedented situation’: How would a gas embargo impact Austria?

What is in the package?

Energy Minister Leonore Gewessler and Finance Minister Magnus Brunner presented the plans following a meeting in the Council of Ministers on Wednesday, May 18th.

The most important points include an increase of the strategic gas reserve by 7.4 terawatt hours (TWh) to 20 TWh. This would cover Austria’s gas consumption for two winter months but the additional gas would not be sourced from Russia, according to the Kronen Zeitung

Gewessler said: “This measure will significantly reduce dependence on Russian gas.”

Increasing the strategic reserve with non-Russian supplies will reduce Austria’s dependence on Russian gas to 70 percent, Gewessler added.

Additionally, gas storage facilities located in Austria – such as the Haidach facility in Salzburg – must be connected to the Austrian gas grid. Haidach, which is supplied by Gasprom, is currently only connected to Germany’s pipeline network and has not been refilled for some time.

Finally, any unused gas in company storage facilities should be surrendered to the government if needed. Companies will be financially compensated for this.

READ ALSO: Austrian Economy Minister says gas embargo would be ‘red line’

What about next winter?

Federal Chancellor Karl Nehammer has already said that gas storage facilities in Austria have to be 80 percent full before the next autumn and winter season.

The storage level is currently at 26 percent, reports Der Standard.

Gewessler also appealed to the Austrian public to make changes to help reduce the dependence on gas for energy, calling for more gas boilers to be replaced with other heating systems.

She said: “Together we are strong and together we can achieve this feat.”

READ MORE: What would an embargo on Russian oil mean for Austria?

SHOW COMMENTS