Russia's Sberbank Zapped By Run As EU Depositors Demand Money

The European arm of Sberbank, Russia's biggest lender, faces failure, the European Central Bank (ECB) warned on Monday, after a run on its deposits sparked by the backlash from Russia's invasion of Ukraine, Tom Sims, and Alexandra Schwarz-goerlich reported for Reuters.

Photo Insert: The Sberbank head office in Moscow

Western allies have taken unprecedented steps to isolate Russia's economy and financial system, including sanctioning its central bank and excluding some of its lenders from the SWIFT payments messaging system. Sberbank Europe and two other subsidiaries were set to fail, after "significant deposit outflows" linked to "geopolitical tensions," according to the ECB.

Austria's Financial Market Authority imposed a moratorium on Sberbank Europe, which is based in the country. Most likely, holders of Russian rubles may dump the currency and exchange them for US dollars or euros, further choking Moscow’s economy.

Separately, Deutsche Boerse, the German stock exchange operator, said that it was suspending from trading a number of securities from Russian issuers with immediate effect. The list includes Sberbank and VTB Bank.

"We've triggered a run on this kind of bank," said Hans-Peter Burghof, a professor at the University of Hohenheim.

Banks and their lawyers are scrambling to assess the impact of the wave of sanctions, which prompted Russia's central bank to more than double its main interest rate on Monday and introduce some capital controls to try and stabilize the ruble.

British bank HSBC is beginning to wind down relations with a host of Russian banks including the second-largest, VTB, according to a memo seen by Reuters, as financial institutions start to implement restrictions on Russia.

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