Half of Russia's Foreign Exchange Reserves Frozen Due to SWIFT Exclusion... Local Bank Run Concerns Arise

[Image source=AP Yonhap News]

[Asia Economy Reporter Kim Hyunjung] Due to the exclusion sanctions imposed by Western allied countries on Russia from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), more than half of Russia's foreign exchange reserves are expected to be frozen.

On the 27th (local time), the Wall Street Journal (WSJ) reported this, citing statements from Joseph Borrell, Vice President of the European Commission, and Ursula von der Leyen, President of the European Commission. At a press conference held that day, President von der Leyen stated, "Russia's major banks will be excluded from the SWIFT system," and announced that transactions of the Russian Central Bank would be banned and its assets frozen.

SWIFT, headquartered in Belgium, is a non-profit organization that operates the payment system necessary for international financial transactions in US dollars. The volume of transactions through SWIFT averaged 42 million per day last year, amounting to $1 trillion annually. Since SWIFT codes are applied even when individuals send money abroad, being expelled from this payment network effectively makes all financial transactions impossible.

Currently, SWIFT has over 11,500 financial institutions from more than 200 countries as members. Exclusion from the payment network means that Russian companies and individuals will be blocked from settling export and import payments, as well as overseas loans and investments. Russia is known to have the second highest number of SWIFT transactions after the United States.

In response to these financial sanctions, signs of a bank run are emerging in Russia. Amid concerns that commercial banks will limit cash withdrawals and suspend bank card usage, scenes of people lining up in front of automated teller machines (ATMs) to secure cash have been observed in Russia.

The Russian Central Bank issued a statement to alleviate these concerns, assuring that sufficient cash and systems are in place and that all operations will run smoothly. However, the Central Bank advised citizens to carry bank cards, as some applications operated by five banks targeted by the sanctions may not function on mobile payment systems.

This content was produced with the assistance of AI translation services.