"The system is stable": the Central Bank will provide support to the financial sector of Russia in connection with the disconnection of a number of banks from SWIFT

The Central Bank announced the stability of the Russian financial system against the backdrop of sanctions announced by the international community.

To date, the regulator has all the necessary resources and tools to maintain stability and ensure the continuous operation of the financial sector, the Central Bank emphasized.

“The Russian banking system is stable, has sufficient capital and liquidity to function smoothly in any situation.

All customer funds on the accounts are saved and available at any time, ”the message on the Bank of Russia website says.

The Central Bank added that banking services are provided as usual, and the cards of all credit institutions in Russia also continue to work normally.

At the same time, in the near future, the regulator plans to continuously provide banks with cash and non-cash liquidity in rubles. 

It should be noted that on the night of February 27, the United States, together with the European Commission, France, Germany, Italy, Great Britain and Canada, announced the introduction of new anti-Russian restrictions.

Restrictions, in particular, imply the disconnection of some Russian banks from the international SWIFT system.

“We are committed to ensuring that certain Russian banks are excluded from the SWIFT messaging system.

This will lead to the disconnection of these banks from the international financial system and will affect their ability to operate on a global scale, ”the countries said in a joint statement on the White House website.

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The new package of sanctions was already the third one this week.

Recall that the first anti-Russian restrictions were introduced by the United States, the EU and a number of other countries after Vladimir Putin announced the recognition of the independence of the DPR and LPR on February 21.

The restrictions affected the sovereign debt of Russia, the state corporation VEB.RF, Promsvyazbank, as well as the majority of State Duma deputies.

At the same time, Germany suspended the certification of Nord Stream 2.

Later, on February 24, Vladimir Putin announced the start of a military operation to protect Donbass from aggression from Ukraine.

The reaction of the West followed immediately, and Washington, along with its allies, announced more serious sanctions.

The restrictions affected a number of other banks and several large Russian companies, as well as high-tech imports of the country.

Blow for everyone

According to experts interviewed by RT, disconnecting Russian banks from SWIFT is one of the most stringent restrictive measures.

Recall that the system was created back in 1973 and formed uniform standards for conducting monetary transactions.

Currently, the platform is used by over 11,000 financial institutions in more than 215 countries around the world.

Every day, several trillion dollars worth of payment orders pass through the SWIFT network.

“With the help of SWIFT, banks inform each other about the transfer of funds in connection with the execution of a trading contract.

We can talk about both physical trade in goods and services, and trading in financial instruments on the market.

This is an absolutely transparent, world-recognized system for transmitting information that settlements and payments are taking place and that they will take place at a certain time with specific details, ”Nikita Maslennikov, head of the Finance and Economics department at the Institute of Contemporary Development, explained in an interview with RT.

According to the specialist, the disconnection of the country's major banks from SWIFT may lead to a sharp slowdown in trade, as financial institutions will not be able to promptly inform their counterparties about payments.

At the same time, since Russia is a major participant in international trade, the announced sanctions risk hitting the entire global economy, the expert believes.

“Disconnecting from the SWIFT system will lead to a violation of the payment and settlement mechanism.

This is critical not only for us, but for the world as a whole.

According to some estimates, global economic growth may slow down to 1%, and this is already on the verge of a global recession.

Thus, the desire of the West to punish Russia will result in the destabilization of the global economic situation, and seriously and, perhaps, even for a long time, ”Maslennikov explained.

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However, the Russian financial authorities have prepared for such a scenario, experts say.

Recall that for the first time proposals to disconnect Moscow from SWIFT were voiced by the West back in 2014 against the backdrop of the Crimean events.

Then the Central Bank of the country started developing the Russian analogue of the international platform and launched the Financial Message Transmission System (SPFS).

As stated in the Central Bank, today the SPFS guarantees the transfer of payment orders within the country "in any scenario."

Now 331 participants are registered in the system.

In addition to Russian banks, financial organizations from Armenia, Abkhazia, Belarus, Germany, Kazakhstan, Kyrgyzstan, Cuba, Tajikistan, Switzerland and South Ossetia are connected to the platform.

“In case Russia is disconnected from SWIFT, there are similar settlement systems.

We are talking not only about the Russian counterpart, but also about the Chinese platform.

At first, of course, temporary difficulties may arise, because SWIFT has many more counterparties.

But in general, the problem is solvable, ”Vyacheslav Putilovsky, junior director for ratings of credit institutions at Expert RA, said in an interview with RT.

In addition, Russia will still be able to conduct transactions in the SWIFT system through banks that have not been sanctioned, says Georgy Ostapkovich, director of the Center for Market Research at the Institute for Statistical Research and Economics of Knowledge at the Higher School of Economics.

The expert noted that Russian credit institutions have a number of subsidiaries abroad, with the help of which it will be possible to carry out settlements for the time being.

“This should not affect ordinary Russians if we are talking about money transfers and payments within Russia.

The Central Bank has taken all necessary measures for this,” Ostapkovich added.

Reserve block

In addition to cutting off Russian banks from SWIFT, the US, along with its allies, also announced plans to freeze the Central Bank's gold and foreign exchange reserves.

Thus, it is planned to limit the ability of the Central Bank to mitigate the effect of the sanctions.

Note that the introduction of the first two packages of sanctions led to sharp fluctuations in the Russian foreign exchange market.

Thus, against the backdrop of the emotional reaction of investors on February 24, the dollar and euro exchange rates on the Moscow Exchange rose to 90 and 100 rubles, respectively.

To stabilize the situation, the Bank of Russia began to sell foreign currency from its reserves and thereby increase the demand for rubles.

As a result of such actions, the dollar and euro exchange rates fell to 83 and 93 rubles.

According to Georgy Ostapkovich, in theory, the freezing of the reserves of the Central Bank may make it impossible to carry out further foreign exchange interventions to support the ruble.

However, as the specialist emphasized, a complete blocking of all gold and foreign exchange reserves of the Central Bank is impossible.

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As follows from the materials of the Central Bank, in mid-February, the volume of reserves of the Bank of Russia exceeded $643 billion. The value was the highest for the entire period of observation.

The Central Bank discloses the currency and geographical structure of its reserves with a semi-annual lag.

Thus, according to the latest data, in mid-2021, the main volume of the Central Bank’s reserves accounted for the euro (32.3%), gold (21.7%), the dollar (16.4%) and the yuan (13.1%).

At that time, only 6.6% of Russia's foreign exchange reserves were placed in the United States, 9.5% in Germany, 12.2% in France, 4.5% in the UK, and 13.8% in China.

In turn, gold is traditionally kept in the vaults of the Central Bank.

“Today, about 50-60% of our reserves are placed abroad.

That is, we are talking about about $ 300 billion. However, the money remaining on the territory of Russia is quite enough to support the national currency for a long time.

In addition, if necessary, the Central Bank can seriously raise the key rate, which will strengthen the ruble,” Georgy Ostapkovich concluded.