Ukraine: the deposit guarantee mechanism will compensate European customers of Sberbank

Above all, avoid panic. The German and Austrian financial authorities announced Wednesday the compensation of the customers of the European subsidiary of the Russian bank Sberbank, sanctioned after the invasion of Ukraine.

In the wake of a mass withdrawal movement, the Austrian financial market supervisory authority on Tuesday banned Sberbank Europe, whose headquarters is in Vienna, from continuing its activities “with immediate effect”. “In light of the current situation, Sberbank has taken the decision to withdraw from the European market,” the parent company said.

The European Deposit Guarantee Scheme was immediately set in motion for Sberbank Europe customers in Germany and Austria. Some 35,000 accounts are affected.

A threshold of 100,000 euros

Out of a total of approximately one billion euros in assets, 913 million euros are covered by the ESA, the Austrian organization which manages the deposit guarantee. According to European rules, this guarantee protects deposits up to a threshold of 100,000 euros.

Clients being mainly based in Germany, however, it is the compensation body for German private banks, the EDB, which will take over operations on behalf of its Austrian counterpart.

“The EDB will soon contact the depositors on behalf of the ESA in order to proceed with the compensation. Customers should not act on their own,” says the Association of German Private Banks (BDB).

This is the second time in a very short time that this mechanism has to be activated in Germany. German commercial banks had already dipped into their guarantee fund to compensate Greensill customers, after the British fintech went bankrupt in March 2020. In this case, however, the final bill will be reimbursed by the Austrians.

Elka König, President of the European Single Resolution Board (CRU), estimated that Sberbank’s assets in Austria would be sufficient to repay this billion euros in deposits.

Sberbank Europe had 800,000 customers in eight European countries. Its subsidiary in Croatia was taken over in record time by the Croatian Postbank (HPB) and that of Slovenia by the Slovenian banking group NLB. The two banks were to reopen on Wednesday without affecting customers, the CRU said.

On the other hand, the subsidiaries in Bosnia and Herzegovina, the Czech Republic, Hungary and Serbia, which do not come under the jurisdiction of the European Central Bank, are at risk of being declared bankrupt.

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