The War in Ukraine and Its Impact on Mortgages in the Czech Republic
On February 24, 2022, Russia invaded Ukraine, causing immense damage to its own economy, Ukraine’s economy, and as a ripple effect — to the European and global economies. A few days after the invasion, the Czech National Bank revoked the license of the Russian bank Sberbank, which had operated as an official bank in the country, as part of the sanctions package against Russia.
Following the announcement, the bank declared its closure and the liquidation of the company that operated it in the Czech Republic. While Sberbank wasn’t a large bank, it was active — often providing loans and mortgages under attractive terms, especially to Russian nationals who were able to receive financing relatively easily based on proof of income from Russia. One day after the closure, all customers who attempted to access their online banking accounts received a notification that the bank was closed and were effectively locked out of their accounts, unable to retrieve information or carry out transactions.
If I’m a Sberbank Customer in the Czech Republic, What Should I Do?
Customer deposits in the bank are insured up to €100,000 according to Czech law. Anyone with an account balance equal to or below this amount will receive full reimbursement. However, those with higher balances are currently not protected and will need to be patient to see what will happen with the bank and the funds deposited there.
It’s Very Important to Keep Paying Your Mortgage on Time!
Customers who have mortgages with Sberbank are required to continue making their payments to a special escrow account established to receive these amounts. This is to avoid accumulating late fees or penalties under the terms of the original mortgage agreement.
It is very likely that one of the Czech banks will eventually acquire all of Sberbank’s mortgage portfolios as a single package. In that case, the customers’ original interest rates and terms will likely be preserved (especially important now, as we are at a peak in interest rates).
If the portfolios are not purchased by a bank but by another financial institution, there is a chance that the mortgage terms will change, and borrowers may be assigned interest rates that reflect the current market — which would likely be higher. This is why it’s crucial to keep making your payments consistently.
If your mortgage was approved but the funds were not yet disbursed, it is likely that the mortgage will not be released in the foreseeable future due to the bank’s closure. In such a case, contact us and we’ll try to assist you as quickly as possible.
