Government Suspends Financial Transactions with 7 Major Banks Including Russian State-Owned Banks

[Asia Economy Sejong=Reporter Son Seon-hee] The government has decided to suspend financial transactions with seven major banks and their subsidiaries, including the Russian state-owned bank Sberbank. However, the suspension timing will be uniformly applied according to the U.S. sanction grace period (30 days) set for each bank.

The Ministry of Economy and Finance announced detailed financial sanctions against Russia on the 1st. This is a follow-up measure after officially expressing the international community's intention to participate in financial sanctions against Russia the previous day.

The financial sanctions against Russia consist mainly of three parts: ▲suspension of transactions with major banks ▲recommendation to stop investing in Russian government bonds ▲exclusion from the international financial messaging network (SWIFT).

The transaction suspension targets include seven banks and their subsidiaries, such as the state-owned bank Sberbank, the largest policy bank Vnesheconombank (VEB), the defense industry support special bank Promsvyazbank (PSB), and major private banks (VTB, Otkritie, Sovcom, Novikom). All these banks are included in the U.S. sanctions list announced earlier. However, the government will allow transactions in sectors and banks where the U.S. has issued general licenses for exceptions, such as agricultural products, COVID-19 medical support, and energy-related transactions, applying the same standards.

The Ministry of Economy and Finance requested, "Domestic financial institutions should cooperate to ensure thorough enforcement of transaction suspensions with sanctioned banks by fulfilling verification obligations under relevant laws, complying with internal control procedures such as monitoring related financial transactions, and providing prior notice to customers. Export-import companies should promptly complete unnecessary financial transactions with sanctioned banks within the U.S. grace period to minimize unnecessary confusion after the suspension is implemented." It added, "The government plans to regularly inspect whether domestic financial institutions conduct transactions with sanctioned banks to supervise compliance with sanctions."

Additionally, the government strongly recommends that domestic public institutions and financial institutions suspend transactions in the issuance and distribution markets for all newly issued Russian government bonds from the 2nd (Korean time) onward. The Ministry of Economy and Finance stated, "Especially for public institutions, we will encourage active participation in suspending transactions of Russian government bonds in line with the government's intention to join financial sanctions against Russia. Private financial institutions should also be particularly cautious to prevent related transactions and cooperate to ensure the effectiveness of financial sanctions."

The government supports the exclusion of Russian banks from SWIFT in line with international community movements and reiterated that it will implement this immediately once the European Union (EU) sanctions are concretized. Following the EU's related sanctions, if the Belgian financial authorities, where SWIFT headquarters is located, issue an exclusion order, SWIFT will restrict network connections for the relevant banks.

The Ministry of Economy and Finance urged, "Once the banks subject to SWIFT exclusion and the timing of application are announced, please ensure thorough preparation of internal control procedures and financial transaction monitoring systems so that this measure is effectively enforced domestically and internationally without disruption." It also emphasized, "Since this is an unprecedented and exceptional measure, financial institutions should be careful to avoid confusion in transactions with customers such as companies and Korean residents abroad."

Furthermore, the government stated, "We will continue to closely monitor the situation in Ukraine and the sanctions imposed by major countries such as the U.S. and EU, and promptly decide and implement additional sanctions in line with international community demands."

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