Last updated: Thursday, March 3rd, 2022 at 10:48am ET
Editor’s Note: Amidst the market implications of the conflict in Ukraine, the very real human cost is at the forefront of the world’s concerns. Our thoughts are with Ukraine and the people impacted by this war. All of the information in this article is public knowledge.
In response to Russia’s invasion of Ukraine, countries around the world are acting to impose sanctions. On Saturday, February 26th, the decision was announced to remove select banks from the SWIFT bank connectivity network and on Wednesday, March 2nd, the official list of banks with the aim of hurting the Russian economy and pressuring Russia to withdraw from Ukraine. In addition to the removal of the following Russian banks from SWIFT, Russia’s Central Bank also faces sanctions. Although removing these banks from SWIFT will have an impact on the movement of money in and out of Russia, it will not bring all movement to a halt because there are alternatives to SWIFT.
View the Treasury Resource Center for managing treasury during the Ukraine-Russia conflict
The banks removed from SWIFT
According to a statement released Wednesday, March 2nd by the European Union, these are the Russian banks that have 10 days to wind down their SWIFT operations before they are cut off on March 12th:
- BANK OTKRITIE. Privately-owned bank headquartered in Moscow, the 7th largest Russian bank with approximately USD 40 billion in assets. It is regarded as one of the fastest-growing investment banks in Russia. Otkritie Bank’s assets that touch the U.S. financial system have also been frozen (US White House).
- NOVICOMBANK. Founded in 1993, Novikombank’s clientele is primarily made up of companies in the oil and gas, aircraft, high tech, automotive and heavy machinery industries. It is among the top 25 largest financial institutions in Russia.
- PROMSVYAZBANK. Headquartered in Moscow, Promsvyazbank is Russia’s 10th largest bank. Founded as a private bank, it is now owned by the government of Russia in order to serve the country’s defense sector. According to the Treasury Department, 70% of state contracts to the Russian Ministry of Defense run through Promsvyazbank (ABC News).
- ROSSIYA BANK. Previously sanctioned in 2014 when Russia annexed Crimea, Rossiya Bank is considered the ‘personal bank’ of many top Russian governmental officials and oligarchs (The Guardian).
- SOVCOMBANKS. The 9th largest bank in Russia is headquartered in Kostroma and has approximately USD 13 billion in assets. It is co-owned by several Russian businessmen and is the 3rd largest privately-owned bank in Russia. sovereign wealth funds of Russia, China, Saudi Arabia, Japan and Qatar hold minority stakes (Reuters).
- VNESHECONOMBANK (VEB) According to VEB’s own website, it is Russia’s financial institution for national economic development, VEB provides financing for large-scale projects to develop the country’s infrastructure, industrial production and technology-related needs. It serves as the government agent for Russia’s foreign debt, both of the Russian Government and of the former Soviet Union.
- BANK VTB PAO. A state-owned bank and the second largest bank in Russia. Estimated to have approximately USD 251 billion in assets which is nearly 20% of banking assets in Russia. 20 subsidiaries are included in the sanctions and the bank is considered heavily exposed to the U.S and western financial systems. VTB and Sberbank are the two largest lenders in Russia. (Reuters) VTB Capital, a subsidiary of VTB, has been suspended from the London Stock Exchange (The Guardian).
Sberbank, the largest bank in Russia, Central and Eastern Europe, was not removed from SWIFT. According to Reuters, it was not removed because they are main payment channels for Russian oil and gas still being used today by countries in the EU. Headquartered in Moscow, Sber employs approximately 281,000 people, holds about 1/3 of all bank assets in Russia with approximately USD 498 billion in assets – which is roughly the same size as US-based Truist Bank (fka SunTrust). It is also the third largest bank in Europe and the 60th largest bank in the world. According to the European Central Bank, the European arm of Sberbank now faces failure.
Gazprombank, another major bank in Russia, remains on SWIFT for similar reasons as Sberbank. While neither Sberbank nor Gazprombank have been removed from SWIFT, they have been targets of other sanctions.
The Moscow Exchange, Russia’s largest stock market, remains closed (Reuters). According to the US Treasury Department, the sanctions are expected to impact approximately 80% of all banking assets in Russia, and U.S. banks must sever their correspondent banking ties within 30 days.
View the Treasury Resource Center for managing treasury during the Ukraine-Russia conflict
The history of expelling banks from SWIFT
The steps taken by western allies in the wake of Russia’s invasion of Ukraine are unprecedented. On February 26th, a Senior Administration Official at the U.S. White House said “In an unprecedented act of global sanctions coordination, our leaders decided to take three actions today: one, to apply the Iran model and disconnect sanctioned Russian banks from SWIFT; two, to undermine the Russian Central Bank’s ability to defend the ruble; and three, to launch a joint task force to collectively hunt down the physical assets of sanctioned Russian companies and oligarchs — their yachts, jets, fancy cars, and luxury homes.”
Until this week, there have only been two situations in which SWIFT has expelled or restricted member banks since its inception:
In March 2012, SWIFT was instructed by the European Union Council to discontinue its communications services to Iranian financial institutions that are subject to European sanctions. In 2016, some Iranian banks were de-listed by the EU and returned to SWIFT. In November 2018, SWIFT again suspended certain Iranian banks’ access to the messaging system.
In 2014 when Russia annexed Crimea, the United States imposed some sanctions on Russia’s Rossiya Bank, but the global community stopped short of removing any Russian banks from SWIFT.
Additional Resources:
U.S. Treasury Department’s Office of Foreign Assets Control: searchable database of sanctions
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