The bank’s European arm Sberbank Europe, which is headquartered in Vienna, is now closing down operations by order of the European Central Bank (ECB). Over the weekend the ECB had warned that Sberbank Europe was “failing or likely to fail” and would be “unable to pay its debts or other liabilities.” Since then the Austrian Financial Market Authority placed a moratorium on the bank’s activities before finally announcing it would be forced to close down. In a statement on Tuesday night the Austrian Financial Market Authority (FMA) explained: “Under instruction by the European Central Bank (ECB), the Austrian Financial Market Authority (FMA), has today issued an administrative decision, prohibiting the licensed credit institution “Sberbank Europe AG” with its registered office at Schwarzenbergplatz 3, 1010 Vienna, from continuing business operations with immediate effect, and has appointed the external auditor and attorney at law, Gerd Konezny, Währingerstraße 16/20, 1090 Vienna, as a government commissioner.”
The FMA said the commissioner will be reporting on whether or not the bank has become insolvent.
Fears over the outlook for Russia’s banks have intensified in recent days as scenes have emerged of customers queueing at cash machines to withdraw money.
Queues have also formed at currency exchanges by Russians desperate to convert rubles into more stable currencies such as dollars.
The ruble has plunged to as low as 120 to the dollar since sanctions hit the Russian economy, stoking fears of hyperinflation.
As confidence in the currency and Russian companies plummets banks have become increasingly at risk.
Before its forced closure Sberbank Europe had warned of a “significant outflow of customer deposits in a very short period of time”, adding that in some cases it had to restrict the amount of daily cash withdrawals.
In a further statement, the banks said: “In the current situation, Sberbank has decided to leave the European market.”
“The group’s subsidiary banks have faced abnormal cash outflows and threats to the safety of its employees and branches.”
Under the Austrian deposit guarantee system customer deposits up to £83.28k (€100k) are protected and will be paid out in ten working days.
Russia’s central bank meanwhile has been scrambling to try to prop up the ailing economy with an emergency hike in interest rates earlier this week aimed at trying to keep money in customer accounts.
The Moscow stock exchange has also remained closed for three days now with fears Russian stocks could see a major sell-off as investors pull away.
Sberbank has already seen its share price on its London listing crash to less than 1p a share.
The situation is a stark contrast to its most recent financial reports which showed net profits for 2021 jumping 64 percent in 2021.
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As of the end of 2020 its European arm had £10.82 billion (€13 billion) of assets with operations across countries including Austria, Croatia, Germany and Hungary.
Its subsidiaries are now expected to be carved up around Europe with Croatian Postbank buying its Croatian unit and the Slovenian arm going to Slovenian bank NLB Group.