Sberbank decides not to write off assets frozen due to sanctions

Sberbank does not plan to transfer assets and liabilities blocked due to sanctions to a special legal entity, German Gref, HEAD of Sberbank, said in an interview with RBC

Sberbank is not considering the option of conducting a special reorganization for the sake of writing off the balance of assets and liabilities that were frozen in 2022 due to sanctions. This was announced in an interview with RBC by the head of Sberbank German Gref.

“We are not considering such a possibility. In general, I must say that we managed to sell almost all of our assets of this kind in one way or another,” he said. Gref added that Sberbank managed to do this even with European assets.

What kind of reorganization are we talking about?

In the summer of 2022, the Russian authorities developed a scheme to support banks that fell under tough Western sanctions by allowing them to carry out non-standard reorganization. Such market participants can form a new legal entity and transfer to it assets frozen due to restrictions, and at the same time liabilities in the form of obligations to foreign creditors. This will allow banks to clear their balance sheets and dissolve the reserves formed on assets that have become problematic. The value of the withdrawn assets and liabilities must be equal so that settlements on debts to creditors from unfriendly countries are performed only at the expense of the assets of the new company, that is, frozen ones.

The amendments were adopted last summer, and banks can reorganize by the end of 2023. One systemically important player has already gone through this procedure, Olga Polyakova, deputy chairman of the Central Bank, said in May, but did not name him. The second bank in terms of assets, VTB, is preparing to reorganize in 2024 if it is possible to supplement the current law with amendments, Dmitry Pyanov, deputy chairman of the credit institution, said.

Sberbank came under the first sanctions at the end of February, immediately after the start of the Russian military operation in Ukraine . At first, the restrictions only concerned stopping operations on correspondent accounts in dollars, but soon Sberbank ended up on the US Treasury's SDN blocking list and under similarly harsh sanctions from the UK and the EU.

Against this backdrop, Sberbank announced its "withdrawal from the European market", where it operated through its subsidiary Sberbank Europe AG ("Sberbank Europe") in eight countries. The method of winding up the business was not disclosed, but at that time the Single Resolution Board (SRB) had already decided to liquidate Sberbank Europe AG. Before the crisis, the assets of the European subsidiary of Sberbank were estimated at €12.94 billion.

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“The situation with our “grandchildren” banks, that is, the “daughters” of Sberbank Europe AG, turned out to be more difficult. Five Balkan banks were sold by regulators to local players, and we have not yet received funds from this sale, ”said Alexander Vedyakhin, first deputy chairman of Sberbank, in an interview with Interfax.

Sberbank is challenging the loss of control over its subsidiaries in the European COURT. Since the sale of businesses in Europe was announced back in 2021, the bank has already qualified these structures as assets from discontinued operations in its financial statements.

The subsidiary of Sberbank in the UK, the investment Sberbank CIB (UK), has also been in the process of liquidation since 2022. External managers estimate its balance sheet assets at $186.9 million, of which $156.3 million is potentially recoverable (.pdf). In 2022, Sberbank managed to sell subsidiary banks in Switzerland and Kazakhstan. In addition, last February a deal was closed for the sale of Sberbank Srbija to the Serbian AIK Banka.

According to IFRS reporting, in 2022 Sberbank recorded a loss from discontinued operations of 143.3 billion rubles. For comparison, in 2021, the group made a profit of 80 billion rubles on this balance sheet item.