Law360, London (April 4, 2022, 10:33 AM BST) -- The British subsidiary of Russia's biggest lender has started insolvency proceedings in court after being unable to make payments as the West hits Russian entities with sanctions following the invasion of Ukraine, the Financial Conduct Authority has said.

Directors of Sberbank CIB (UK) Ltd. applied to a court in London on Friday to appoint special administrators to wrap up the company and repay creditors, the regulator said.

Sberbank CIB, which is authorized by the FCA, provides trading and execution services for its clients, including those with access to Russian markets. The regulator said that the lender has become "operationally unable to make payments, despite the firm having sufficient assets to cover its liabilities."

"Sberbank CIB's failure is the consequence of the ability and risk appetite of critical suppliers to work with firms with links to the Russian state following the invasion of Ukraine and the global imposition of sanctions," the watchdog said.

The subsidiary has not been sanctioned. But its parent company, Sberbank of Russia PJSC, has been hit with sanctions in the U.S. The Russian parent bank has also been banned from clearing sterling payments in the U.K.

The British government has also encouraged investors to sell existing investments in Russia to turn off funding for Putin's regime.

The London court on Friday appointed David Soden, Robert Fishman and Matthew Roe, all of Teneo Financial Advisory Ltd., as joint special administrators of Sberbank CIB.

The joint special administrators will assess the client money held by the firm and will work to return it, the FCA said.

Sberbank CIB said on Friday that "the affairs, business and property of the company are managed by the joint special administrators."

The special administration regime was introduced in England after the collapse of Lehman Brothers to ensure that administrators of collapsed investment firms were returning clients' assets as soon as possible. 

Sberbank has struggled across Europe.

Vienna-based Sberbank Europe AG applied for court-supervised insolvency proceedings in March after running into a liquidity squeeze. And Switzerland's financial regulator ordered the Swiss subsidiary of Sberbank to suspend payments and transactions for two months from March to shield its creditors against losses

Teneo Financial Advisory is represented by Clifford Chance LLP.

--Editing by Ed Harris.

Correction: An earlier version of this story wrongly stated who Clifford Chance is representing. That error has been corrected.

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