news center

Russia will be Kicked out of swift system!
NEWS02 Mar 2022
On the early morning of February 27, Beijing time, the United States, the European Union, the United Kingdom and Canada issued a joint statement, announcing that several major banks in Russia were prohibited from using the global Interbank Financial Telecommunications Association (Swift) international settlement system as the latest sanctions against Russia, and implemented "restrictive measures" against the Central Bank of Russia at the same time, Prevent the Russian central bank from deploying its international reserves in a manner that could undermine sanctions.

According to the joint statement jointly issued by several countries, the latest sanctions will ensure that Russian banks are cut off from the international financial system and "damage their ability to operate globally". This means that Russian banks will not be able to communicate safely and effectively with foreign banks.

The joint statement on the same day did not list the Russian banks that will be excluded from the swift system (expressed as "selected Russian banks"), but US officials revealed that the relevant sanctions target 10 of Russia's largest financial institutions, whose assets account for nearly 80% of the total assets of Russia's banking industry. The list will be drawn up in a few days. A spokesman for the German government said that this time it was mainly aimed at Russian banks that had been sanctioned, but it would be extended to more other Russian banks if necessary.

A statement from swift said they were in contact with European authorities to learn more about the entities to be bound by the new measures and were preparing to comply with legal instructions.

Yesterday, the "swift system" has been on the microblog hot search.

The international settlement system of global Interbank Financial Telecommunication Association (Swift) is mainly used to transfer settlement information between global banking systems. International settlement can hardly bypass swift.

At present, the information transmission of global cross-border payment is basically realized through swift, so being excluded by swift means that cross-border payment and settlement will become very difficult, which may affect the smooth development of global capital exchanges and international trade in Russia.

Therefore, this sanction is also known as "financial nuclear bomb".

In 2012, the United States and Europe upgraded the financial sanctions against Iran, directly removed four important Iranian banks from the swift system, and then threatened EU member states with economic ties with Iran, resulting in Iran's loss of nearly half of its oil export revenue and nearly 30% of its foreign trade.

After the Crimea incident in 2014, the United States eliminated seven large Russian banks from the swift system, resulting in the freezing of the payment functions of about 500000 credit and debit cards and frequent panic runs. In the short term, major Russian banks have been impacted to varying degrees, and a large number of commercial activities have stagnated.

Subsequently, Putin has prepared for a rainy day. In 2015, Russia established the Bank of Russia financial information system (SPFS) based on the simulation of swift system, but the scope of application of SPFS is still relatively narrow.

On April 29, 2021, Peskov, the press secretary of the Russian President, said that if Russia and the swift payment system were cut off, Russia would find an alternative in a short time.

Attention on the trading:


Rouble crash risk

Last week, the Russian Ruble has plummeted - the ruble exchange rate plummeted in the morning trading on February 24. Since January 2016, the US dollar has exceeded 84 rubles against the ruble for the first time, and the euro has exceeded 95 rubles against the ruble for the first time since December 2014.

The Central Bank of Russia has also entered the market to support the ruble, providing us $5 billion through foreign exchange swap operation. However, Russia was kicked out of the swift system, and Europe, the United States, Britain and Canada promised to impose sanctions on the foreign exchange reserves of the Russian central bank, which means that the ability of the Russian central bank to support the ruble will be limited.

The sharp depreciation of the local currency is a disaster for Russian import enterprises. Some enterprises may take a wait-and-see attitude and suspend orders.


Russian economic risks
According to the information of the Russian swift Association, a total of about 300 Russian financial institutions, including those that have been sanctioned, use swift, which handles more than 80% of the country's international settlement. Because there are still many details that are not completely clear, it is difficult to estimate the impact.

However, when western countries threatened to exclude Russia from swift in 2014, former Russian finance minister Kudrin once estimated that the move could reduce Russia's GDP by 5% a year.


Foreign exchange collection channel risk

For foreign traders who need to receive payment from Russia recently, please contact your bank quickly and ask how to collect foreign exchange safely. Generally, banks will have more professional solutions.