Financial Sector Grapples with Response to Russia's SWIFT Expulsion

Payment Networks of 7 Banks Blocked from the 12th
Financial Services Commission and Banks Busy Minimizing Damage

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Song Hwajeong] As the European Union (EU) moves to expel seven Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), financial authorities and domestic banks are busy responding to the situation.

On the 2nd (local time), the EU introduced sanctions excluding seven Russian banks from the SWIFT payment network. The seven banks excluded from the SWIFT network include VTB Bank, Russia's state-owned bank and the country's second-largest bank, as well as Bank Rossiya, Bank Otkritie, Novikombank, Sovcombank, Promsvyazbank (PSB), and VEB. However, Russia's largest banks, Sberbank and Gazprombank, were not included in the SWIFT exclusion list. Accordingly, SWIFT announced that it will block these Russian banks from the payment network starting on the 12th in accordance with EU regulations.

Consequently, financial authorities and domestic banks are actively responding. A Financial Services Commission official explained, "Since the exclusion from the SWIFT network will take effect from the 12th, international interbank payments will not be possible, and banks not subject to sanctions will have to be used," adding, "We sent an official letter to banks yesterday regarding the sanctions." Through the letter, the Financial Services Commission requested cooperation to ensure thorough suspension of transactions with sanctioned banks by complying with internal control procedures such as fulfilling legal verification obligations, monitoring related financial transactions, and providing prior customer notifications. They also urged caution to prevent confusion in transactions with corporate and expatriate customers. The official stated, "We will closely monitor the details of the sanctions and grace periods and respond according to changes in the situation."

Banks plan to be thorough in customer guidance. Domestic banks have already suspended transactions with banks designated as Specially Designated Nationals (SDN) by the United States, which include Russia's largest state-owned bank VEB, the defense-support special bank PSB, and commercial banks VTB, Otkritie Bank, Novikombank, and Sovcombank. This list almost matches the banks now excluded from the SWIFT network. A banking industry official said, "The seven Russian banks excluded by SWIFT are already SDN-designated, so domestic banks, including ours, have not been conducting transactions with them, so there is no significant change from the banks' perspective," adding, "We continue to provide customer guidance and conduct ongoing monitoring of related transactions and transaction forecasts to prevent any customer harm."

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