The European Union and the United States have imposed restrictions on Russia’s financial sector. Among the most stringent measures is disconnection from the SWIFT payment system. What does this mean for Russians and what restrictions will it entail?
What is SWIFT anyway?
SWIFT is a worldwide system for transmitting information about financial transfers, data on payment orders and orders for transferring funds also fall here. The abbreviation itself contains the name of the Society for Worldwide Interbank Financial Telecommunications. To put it simply, SWIFT is a worldwide cooperative of banks in many countries that exchange information about transfers. Note that the system transmits not so much money transactions as messages about the transfer of funds from one bank to another.
Each month, the SWIFT system processed over 700 million bank transfer messages from over 10,000 users worldwide. The sums in the system are “spinning” colossal – about seven to eight trillion dollars daily.
My bank has been sanctioned and may be disconnected from the SWIFT system. What do you need to do with your account?
If your bank has been sanctioned and is in danger of being disconnected from the SWIFT system, then you don’t have to worry about the safety of your own funds. All financial transactions within the country will work as before. Representatives of large banks themselves have repeatedly stated this. It will be possible to transfer money in rubles, and in dollars, and in euros. No one will take your money from your accounts. The best thing in this situation is not to do anything, not to try to cash out the currency and rubles. Your money is definitely safe in the bank.
Problems can arise for people who send payments abroad, say, to settle accounts with suppliers and so on. If your bank is already disconnected from SWIFT, then most likely your payments to partners and friends in Europe and the USA will definitely not go through. Those Russians who use cards of Russian banks abroad will also not be able to do anything with their funds – payments will not go through, and it is also impossible to withdraw money from the card. The only way out for such Russians is to ask relatives or friends to open an account in a bank that was not subject to restrictions. To do this, you will have to provide all payment information, withdraw funds from the accounts of the sanctioned bank and put them on a new one in a financial institution that is not subject to restrictions.
Which banks in Russia have already been disconnected from SWIFT?
So far, there are only seven such banks. These are VTB Bank, Otkritie, Promsvyazbank, Novikombank, Rossiya Bank, Sovcombank and Vnesheconombank, which did not work with individuals, but was an organization for financing development projects within the country. European politicians regularly announce plans to disconnect other Russian financial organizations from this payment system, but the matter has not yet come to a head. It is also worth knowing that Sberbank has decided to close branches of its European subsidiaries and stop doing business in the EU. This does not mean that it is no longer possible to use Sber cards abroad, but such a prospect looms in the foreseeable future.
Are there other systems similar to SWIFT?
There are many. In Russia, since 2014, all payments have been made using SPFS, a financial messaging system. It employs more than three hundred banks not only in our country, but also a number of institutions in the CIS countries. In addition, the domestic system is used in some Russian financial institutions that have subsidiaries in Germany and Switzerland.
China also has its own counterpart to the SWIFT system – CIPS. It stands for “China International Payment System”. She does not make payments in dollars and euros, but only in the national Chinese currency – yuan.
The European Union also has its own transfer system – INSTEX, translated as “Means of supporting trade exchanges.” But it also has a very limited circulation and is used to exchange information between member countries of the European political bloc with Iran.
Have other countries been disconnected from the SWIFT system before?
Turned off. And those were North Korea and Iran. At the same time, it was the Islamic country that was first turned off, in 2012, due to accusations of developing nuclear weapons. But in 2016, due to the “thaw” in relations between Iran and the EU, access to SWIFT was returned to the country.
North Korea was cut off from the payments system in 2017 after ballistic missile tests.
Is disconnecting Russian banks from SWIFT forever?
No one can give an exact answer to this question right now. European and American politicians understand that the use of tough measures against the Russian economy will inevitably endanger their own markets and companies. With a high degree of probability, it can be argued that after the “cooling” of relations between Russia, the US and the EU, “warming” will come, therefore, part of the sanctions will be lifted and SWIFT will return to full-fledged work in our country.
