The U.K. arm of Russia’s biggest lender Sberbank of Russia PJSC is facing collapse, becoming London’s highest profile financial casualty in the aftermath of the invasion of Ukraine.
Sberbank CIB U.K. Ltd. directors are applying for special administration, a form of insolvency that means the administrator ensures there’s minimal disruption to financial markets as a result of a firm’s collapse, its lawyer Mark Phillips told a London court Friday. He cited “difficulties resulting from sanctions” and said though the unit is not sanctioned, it’s still “a problem.”
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Phillips said the administrators have been in talks to try to secure a special license to allow the unit to carry on with some financial services. A license granted to Sberbank to continue certain activities runs out on Sunday
The Russian government holds a controlling stake in the bank. While Sberbank’s U.K. unit hasn’t been specifically sanctioned, its parent company has been banned from clearing sterling payments through the U.K. and has been cut off from the U.S. financial system.
Sberbank said in an emailed statement that it “will wind up operations” of Sberbank CIB U.K. “in accordance with the legislation after fulfilling all customer liabilities.”
It said the decision was taken “as a result of reevaluating the economic potential of the Global Markets business unit’s presence in the U.K.” The company’s key employees “will continue to perform their duties.”
The move comes just weeks after a judge ruled Sova Capital Ltd., a London-based broker owned by Russian banker Roman Avdeev, should enter special administration. Lawyers for Sova told a London court last month that it had “severe liquidity problems” and “significant exposure to Russian interests.”
(Updates with details from court hearing throughout)
–With assistance from Donal Griffin.