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The urgent call to ban Russian banks from SWIFT by Ukraine President Volodymyr Zelenskyy was finally heeded when the Biden Administration on Saturday, 26 February, announced jointly with the European Commission and Western allies, including UK, Canada as well as Japan, measures to bar selected Russian banks from the global payment messaging platform and the the Central Bank of Russia from the international financial system.
The Biden Administration finally bit the bullet to bar the Russian financial system from the global payment messaging platform, SWIFT. The escalation of Russia’s attack on Ukraine hastened the decision.
On Saturday, the White House announced that leaders of the European Commission, France, Germany, Italy, the United Kingdom (UK), Canada, and the United States (US), later joined by Japan, are committed to “ensuring that selected Russian banks are removed from the SWIFT messaging system. This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally”.
The joint press statement also stated that the leaders are committed to “imposing restrictive measures that will prevent the Russian central bank from deploying its international reserves in ways that undermine the impact of our sanctions”.
This more severe measure which the US and Germany had resisted earlier for their wider impact on the international banking and financial system was precipitated by the escalation of Russia’s attack on Ukraine as its troops advance towards Kyiv and other Ukrainian cities. The leaders “are resolved to continue imposing costs on Russia that will further isolate Russia from the international financial system and our economies. We will implement these measures within the coming days,” the White House statement read.
In the wake of the attack, Russian financial institutions are facing a barrage of sanctions from the UK, US as well as the European Union member states and partners. The cumulative actions will also directly impact banks and FIs in countries that have significant exposure to Russia and its related interests. Data from the US Treasury shows that on a daily basis, Russian FIs conduct about $46 billion worth of foreign exchange (FX) transactions globally, 80% of which are denominated in US dollar.
The US Treasury’s earlier action against Russia’s two largest lenders, Sherbank and VTB, which make up more than 50% of total industry assets will impact global correspondent banking flows, and by extension the ability of European and US companies and banks to process payments for Russian counterparties. The US Treasury’s imposition of correspondent and payable-through account sanctions on Sberbank and full blocking sanctions on VTB will likely send ripples across global FIs. According to these directives, U.S FIs are required to close any correspondent payable-through accounts and reject any future transactions including any payments processed in US dollar once it hits a US FI. Blocking sanctions have also been imposed on three other major Russian financial institutions; Otkritie, Novikom, and Sovcom.
To find out how the SWIFT ban will impact the Russian and international banking and financial systems, click here.
To read the White House joint statement in full, click here.
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by : on 2022-02-27 03:36:00
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