Swiss Watchdog Allows Sberbank Unit To Settle Debts

Law360, London (July 1, 2022, 12:12 PM BST) -- Switzerland's finance watchdog said Friday it would partly lift restrictions on the Swiss arm of Russia's largest bank to allow it to settle its debts with creditors not under Western sanctions imposed because of the invasion of Ukraine.

The Swiss Financial Market Supervisory Authority said it would allow Sberbank (Switzerland) AG to settle creditors' claims and make payments to them until July 5 — if the creditors are not the subject of Western sanctions.

The regulator, known as FINMA, said that Sberbank's Swiss subsidiary is still prevented from making payments to its parent company or sanctioned individuals but is now in a position to settle its debts and possibly go through a sale.

"This step is possible because the bank has successfully stabilized its financial situation under FINMA supervision, and the international sanctions currently in force permit such payments," the Swiss authority said in a statement.

A FINMA investigating agent will monitor the payments to ensure that Sberbank Switzerland treats its creditors equally and reduces its balance sheet. The agent will also check the payments comply with sanctions laws and anti-money laundering law.

Sberbank Switzerland, which was not immediately available for comment, is a commodity trade financing specialist with approximately 70 clients. It focuses on international traders and Russian commodity producing companies.

The Swiss company held approximately three billion Swiss francs ($3.1 billion), and more than 500 million francs in capital, at the end of 2021, according to Sberbank.

FINMA forced the Sberbank Switzerland to suspend all its transactions in March, saying that the war in Ukraine had placed the finance company at risk of liquidity problems.The supervised suspension is set to end in August after Western sanctions on Sberbank became more intense, with no end to Russia's invasion of Ukraine in sight.

Switzerland was one of the first countries to cut Sberbank off from SWIFT, the global interbank payment messaging system, severing the bank's link to the nerve center of the Swiss banking system.

The European Union followed with its own SWIFT ban in May in its sixth package of sanctions against Russia. The ban made Sberbank the eighth Russian bank to face EU blocks on SWIFT since Russian troops marched on Ukraine's capital,Kyiv.

The financial restrictions of sanctions have already forced Sberbank to make its coupon payments in rubles for bonds denominated in foreign currencies, possibly breaching the bond terms and possibly defaulting on its debts.

-- Additional reporting by Irene Madongo, Joel Poultney and Najiyya Budaly. Editing by Ed Harris.

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