They said they would stop access to SWIFT, an international payment system.
Here’s a list of the impact that sanctions have already been made on banks and investors
WHAT HAS BEEN ANNOUNCED UP TO THIS DATED?
On Saturday, the United States, Britain and Canada agreed to remove some Russian banks SWIFT payments systems. This was in response to the potential damage it would do to Russia’s trading partners as well as Russia’s financial nuclear weapons, which the French finance minister called an “financial nuke weapon”.
After the U.S. Treasury Department stated it was targeting Russia’s “core infrastructure”, the Treasury Department sanctioned two of Russia’s largest banks, the state-backed Sberbank (supported by VTB). Otkritie and Novikombank, as well as senior executives from state-owned banks are also on the list.
U.S. banks are required to end their correspondent banking ties with Russia’s largest lender Sberbank within 30 days. These ties allow banks to make payments among themselves and move money around the world.
Washington officials also had the most powerful sanctioning tool: they added VTB, Otkritie and Novikombank to the Specially Designated Nationals list. This effectively bans banks from the U.S. financial sector, bans them from trading with Americans, and freezes their U.S. assets.
Two Belarusian state-owned banks, Belinvestbank and Bank Dabrabyt, are also under U.S. sanctions. They were targeted for their support of Moscow’s attack.
After the British government announced it would place an asset freeze on all Russian banks including VTB and prevent major Russian companies raising funds in Britain, the U.S. imposed sanctions.
Boris Johnson, British Prime Minister, stated that Russian banks would be disconnected from the clearing and sterling markets.
Britain also announced travel bans and asset freezes for members of Russia’s financial and political elites, which includes those who have enjoyed long-standing high-rolling London lifestyles.
In the end, more than 100 entities, individuals and subsidiaries will be sanctioned.
Ursula von der Leyen, President of European Commission, stated that the EU leaders had agreed to sanctions against Moscow. These sanctions would target 70% of Russia’s banking market.
After having frozen assets at Rossiya Bank and Promsvyazbank earlier in the week, the bloc banned the issuance of bonds, shares, or loans in EU to refinance Alfa Bank and Bank Otkritie.
However, the EU has not placed asset freezes on top three Russian banks, Sberbank and VTB, as well as Gazprombank.
The bloc also established a cap at 100,000 euros ($112,700.00), for EU bank accounts held by Russian citizens. They will not be permitted to purchase euro-denominated shares.
With the exception of certain utilities, refinancing Russian state-owned businesses in the EU is also prohibited. Russian counterparts will not be served by EU securities settlement houses.
WHAT’S NEXT?
Russia’s banks, which are large and well-integrated into the global financial system mean that any sanctions against the largest institutions could have a wide impact beyond Russia’s borders. They would be more expensive and difficult to transfer if they were removed from SWIFT.
It is expected to also affect the country’s European and other trading partners. Although further details are still being gathered, Germany suggested Saturday that the allies wanted to restrict SWIFT’s functionality in a targeted and functional manner to limit collateral damage.
SWIFT’s ban would be added to other sanctions that restrict the ability of Russia’s biggest banks to do international business.
The U.S. Treasury stated Thursday that sanctions would affect billions of dollars of daily foreign currency transactions made by Russian financial institutions. These institutions are responsible for approximately $46 billion in forex transactions. 80% of these transactions are conducted in dollars. It stated that the vast majority of these transactions would be “disrupted” by now.
Nearly 80% of Russian banks are targeted by the sanctions
Sberbank stated that it was ready for any developments.
VTB stated that it was prepared for any scenario that could be severe.
Otkritie, Novikombank and Sovcombank did not respond to requests for comment. A request for comment was also not received by the Russian Embassy in the United States.
WHAT ARE YOU GOING TO DO HAREST?
Western creditors and banks have been worried about Russia blocking SWIFT. This is used by over 11,000 financial institutions from more than 200 countries.
This would be a serious blow to Russian banks, but the consequences could be severe. Officials from the West have stated that blocking Russia would be technically challenging and could cause problems for trading partners. Concerns have been raised about, among other things, how Russian energy imports will be paid and whether foreign creditors will get paid.
Analysts believe that Russian institutions are more capable of coping with sanctions than they were eight years ago, but it does not mean that they wouldn’t hurt.
WHERE ARE FOREIGN BANKS THE MOST EXPOSED TO RISK?
While many foreign banks have reduced their Russian exposure since the annexation in 2014 of Crimea, several Western banks have been involved with deals and have had other relationships.
Last week saw shares of Russian banks such as Austria’s Raiffeisen Bank International or France’s Societe Generale suffer severe losses.
Based on Bank of International Settlement figures, each of the French and Italian banks had claims of around $25 billion against Russia during the third quarter of 2021.
Austrian banks held $17.5 billion. This compares to $14.7 billion in the United States.
($1 = 0.8873 euros)
