OPINION
Market Rating Before FOMC MeetingJan 31
Market Note: Removal of Russian banks from SWIFT system
Russia - Ukraine Conflict has been at the top of the agenda recently. Tensions that escalated when Russia officially launched a military operation in the Donbass on February 24 continues to grow after Russian President Putin put the Nuclear Deterrent Forces on high alert and ordered the invasion of the capital Kyiv.
At this point, there are threats of harsh sanctions from western countries, especially the United States and the United Kingdom, in order to stop Russian invasion. In particular, the removal from SWIFT system, which has been raised recently, is also included in these sanctions.
But removal of Russia from the system is controversial, given that Russia has a significant share of global trade through natural gas and grain, and has influential banks in the financial sector.
What is SWIFT?
The Society for Worldwide Interbank Financial Telecommunications, SWIFT, has a key role in global trade. In 1973, 239 banks from 15 countries got together to solve a common problem: how to communicate about cross-border payments. The banks formed a cooperative utility, the Society for Worldwide Interbank Financial Telecommunication, headquartered in Belgium. SWIFT went live with its messaging services in 1977 and rapidly became the reliable, trusted global partner for institutions all around the world.
It is estimated that Russia, which has 291 members in the system, is the 6th country, 1.5 percent share of the total payments, and transfers approximately $ 800 billion each year.
Removal of Russia from Swift means that, in simple terms, the country's access to international financial markets will be restricted. In particular, payments on import and export activities and syndicated loans abroad are becoming more difficult to find for Russian firms.
The West
US President Joe Biden announced that US citizens are banned from trading with the Central Bank of Russia (CBR), the Russian Wealth Fund and the Russian Ministry of Finance yesterday.
In Europe, European Commission President Ursula von der Leyen announced that the designated Russian banks would be removed from SWIFT system. And the UK, Germany, France, Italy and Canada supported this in a joint statement announcing the significant retaliatory measure.
On the other hand, China, which is the locomotive economy of Asia, plays it safe in Russia - Ukraine Conflict. Foreign Ministry Spokesperson Wang Wenbin said that the decision of West to remove some Russian banks from SWIFT system is ‘illegal and unilateral’, noting that he opposes these sanctions. Japan, the leading country in the region, announced its support for the sanctions on the removal of Russian banks from the system.
Regarding the issue, the US payment system Mastercard announced that a large number of financial institutions were blocked from accessing the payment network as part of sanctions against Russia, while the multinational financial services company Visa reported that it would implement a similar practice. However, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said disconnecting Russian banks from the SWIFT system may bring 'unintended consequences' that include third parties finding ways around the penalty.
At this point, there are threats of harsh sanctions from western countries, especially the United States and the United Kingdom, in order to stop Russian invasion. In particular, the removal from SWIFT system, which has been raised recently, is also included in these sanctions.
But removal of Russia from the system is controversial, given that Russia has a significant share of global trade through natural gas and grain, and has influential banks in the financial sector.
What is SWIFT?
The Society for Worldwide Interbank Financial Telecommunications, SWIFT, has a key role in global trade. In 1973, 239 banks from 15 countries got together to solve a common problem: how to communicate about cross-border payments. The banks formed a cooperative utility, the Society for Worldwide Interbank Financial Telecommunication, headquartered in Belgium. SWIFT went live with its messaging services in 1977 and rapidly became the reliable, trusted global partner for institutions all around the world.
It is estimated that Russia, which has 291 members in the system, is the 6th country, 1.5 percent share of the total payments, and transfers approximately $ 800 billion each year.
Removal of Russia from Swift means that, in simple terms, the country's access to international financial markets will be restricted. In particular, payments on import and export activities and syndicated loans abroad are becoming more difficult to find for Russian firms.
The West
US President Joe Biden announced that US citizens are banned from trading with the Central Bank of Russia (CBR), the Russian Wealth Fund and the Russian Ministry of Finance yesterday.
In Europe, European Commission President Ursula von der Leyen announced that the designated Russian banks would be removed from SWIFT system. And the UK, Germany, France, Italy and Canada supported this in a joint statement announcing the significant retaliatory measure.
On the other hand, China, which is the locomotive economy of Asia, plays it safe in Russia - Ukraine Conflict. Foreign Ministry Spokesperson Wang Wenbin said that the decision of West to remove some Russian banks from SWIFT system is ‘illegal and unilateral’, noting that he opposes these sanctions. Japan, the leading country in the region, announced its support for the sanctions on the removal of Russian banks from the system.
Regarding the issue, the US payment system Mastercard announced that a large number of financial institutions were blocked from accessing the payment network as part of sanctions against Russia, while the multinational financial services company Visa reported that it would implement a similar practice. However, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said disconnecting Russian banks from the SWIFT system may bring 'unintended consequences' that include third parties finding ways around the penalty.
