Solvent but bankrupt: how sanctions felled Amsterdam Trade Bank
7 June 2022
The writing was on the wall for the Amsterdam Trade Bank (ATB) when, after being sanctioned by the US in early April over its Russian ownership, Microsoft yanked the company’s and staff’s access to their email accounts.
The decision by the US software giant and notice of a similar planned move by Amazon, which provided cloud services to the Dutch lender, and other technology providers show how sanctions can cripple a bank’s operations beyond the ramifications for its links to the financial system.
A Dutch court placed the bank – described at the time as a solvent and “healthy” business – in the hands of bankruptcy trustees on April 22, weeks after the US and UK imposed sanctions on the lender and its Russian parent company, Alfa Bank.
ATB said at the time that “the majority of the bank’s counterparties” felt they could no longer do business with the lender, founded in 1994 and which was until recently focused on commodities and shipping finance.
The bankruptcy was preceded by a previously undisclosed attempt to sell the bank to an undisclosed buyer, according to a May 23 report filed by the trustees with the Dutch Central Insolvency Register. The deal fell apart on the evening of April 21, according to the report, and by the following night the lender was in the hands of the trustees.
The trustees, from law firm Stibbe, had to take legal action in the Dutch courts to get hold of the company’s internal emails and records from Microsoft and prevent the expected loss of access to documents stored by Amazon, which had given notice that it would withdraw its cloud storage services. Job van Hooff, one of the trustees, tells GTR that Amazon quickly co-operated while a court ordered Microsoft to grant the trustees access.
The US Office of Foreign Assets Control (OFAC) specifically designated ATB a sanctioned entity in mid-April, making the lender one of a large group of overseas subsidiaries of Russian banks that have been cut off from the western financial system since President Vladimir Putin ordered an invasion of Ukraine in late February.
But ATB thought it might be in with a chance – over three decades it had carved out its own independent identity separate from that of Alfa Bank, Russia’s largest privately owned lender. In the early days of the war the bank even issued a statement blaming Russia for the outbreak of the conflict.
“It is a war that Russia must stop,” the statement read. “As a bank operating across Europe we have colleagues from many countries including Ukraine and Russia and we are deeply saddened by the crisis unfolding in Ukraine.”
ATB described itself as “an independent Dutch bank”. “We act independently from all our shareholders, are separately governed and comply with all sanctions against Russia,” it added.
Oren Bass, ATB’s CEO at the time of the bankruptcy, is a US citizen, brought on board in 2020 to oversee the lender’s transition from a commodities and shipping financier to slick, digital lender to SMEs across Western Europe under a new brand: FIBR.
But the bank’s protestations of independence were not enough to encourage its IT suppliers to stay on.
ATB’s bank accounts at Deutsche Bank, ING and UBS were blocked, according to the trustees’ report. Van Hooff says “quite a number of banks” refused to accept incoming payments from ATB, and another critical moment came when an unnamed IT vendor facilitating the bank’s access to the Sepa payment system also withdrew its services, leaving the bank unmoored from a crucial part of Europe’s payment infrastructure.
British employees of the bank were forced to resign on April 23 after the expiration of a winding-down licence granted by the UK Treasury that had allowed dealings with subsidiaries of Alfa Bank, the insolvency report says, although the trustees secured a new licence the following month.
ATB’s demise was the first instance of a Dutch bank being bankrupted by sanctions rather than financial insolvency, according to Sebastiaan Bennink, an Amsterdam lawyer specialising in sanctions and export controls.
While ATB’s standalone identity holds little sway in the face of the legal might of the US sanctions regime, Bennink suggests that the Dutch government could have engaged earlier with OFAC to mitigate the impact on Dutch employees and business.
Bennink tells GTR that the bearing on the bank’s 93 employees in the Netherlands may be a lesson for how sanctions could be better targeted in the future. “ATB is a relatively small bank in the broader scheme of things, it will not hurt the Putin regime much if it goes bankrupt,” he says.
Matt Kus, head of lending partnerships under the FIBR brand, wrote on LinkedIn after the bankruptcy: “Putin won’t shed a tear or give a thought to the fact that the US and UK shut down a Dutch bank, staffed by European (plus one American and a couple of Ukrainian) employees but I can understand the thought behind the effort.”
“Sanctions are a great and necessary tool but I wish the US and UK gave a bit more thought to the secondary and tertiary effects to simply sanctioning the richest Russians and private Russian banks around the world.”
Sale explored
Van Hooff says ATB had recently stopped all new trade, commodities and shipping business to focus solely on its pivot to SME lending.
However, the bank still had a portfolio of legacy lending, and the trustees are now exploring whether it can be sold to another institution, he says. “We are looking into that right now. We could sell it, we could continue servicing it. We’re looking into the various options.”
Van Hooff says the trustees have been advised that it is legal under US and UK sanctions for borrowers to make repayments or draw down on credit extended by ATB, but that some customers are looking to exit.
“There are borrowers that say they want to be out,” he says. “We have seen borrowers that want to buy back, because they simply want to be out, so there are concerns.” The trustees say they will not honour existing loan commitments except in “exceptional circumstances” where a borrower could make a damages claim against the bank.
The lender had outstanding loans of around €570mn at the time of the bankruptcy. Its assets had dropped from €1.4bn at the outbreak of the war in Ukraine to €953mn at bankruptcy, partly as a result of withdrawals by account holders spooked by the stand-off with Russia.
The trustees are working on securing an extension to a winding-down licence granted by OFAC, which is due to expire in mid-July. The trustees have created a foundation to which most of the bank’s unsold assets can be transferred if OFAC refuses to extend the licence, allowing service providers to work with the trustees without fear of violating sanctions.
Other overseas subsidiaries of Russian banks have also been liquidated or are in the process of winding up. Sberbank Europe, headquartered in Austria, said on May 5 that it had repaid all its deposits, totalling €926mn, and has received approval from a government-commissioned administrator to sell the majority of its assets.
In early April German regulators prohibited VTB Bank’s European subsidiary, headquartered in Frankfurt, from following instructions from its parent company, effectively wresting control of the bank from Moscow.
The subsidiary said in a statement that the move should allow borrowers, suppliers and correspondent banks to continue doing business with it as normal.
Kindly supplied by Global Trade Review
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