Current Situation Surrounding Sberbank CZ

We have recently been approached by clients in relation to facility agreements with or with funds held by Sberbank CZ.

On 28 February 2022 the Czech National Bank notified the Financial Market Guarantee System about Sberbank’s inability to meet its obligations to entitled persons. We understand this inability was triggered by a lack of liquidity rather than the bank being overleveraged. We further understand from public sources that an administrative proceeding has been initiated with Sberbank CZ that may lead to loss of license.

Similar situations at Sberbank were dealt with differently in other countries, e.g. the Austrian parent (Sberbank Europe AG) is subject to moratorium; the interest in the Croatian, Bosnian, Hungarian and Slovenian affiliates was transferred to other major local banks based on a contract from November 2021.

The practical consequences for Sberbank mean there are restrictions on money transfers, the opening of new accounts, the acceptance of deposits, the transfer of assets, or encumbrance on assets by third party rights.

Even if Sberbank loses its license, the bank still needs to comply with its commitments as provided by legal regulations and relevant contracts. The repayment of deposits by the Financial Market Guarantee System and limited pay-out of basic compensation commenced on 9 March 2022 via designated offices of Komerční banka. Clients with facilities and mortgage loans still have existing obligations to repay the loans in the agreed instalments, but the bank should allow for refinancing of the debts by another bank. The treatment of business facilities will mainly depend on contractual covenants, e.g. the offset of deposits against existing indebtedness.

(This article is not intended to provide legal or other advice.)