US, UK, Europe and Canada will block Russian access to SWIFT

NEW YORK, Feb 26 (Reuters) – The United States, Britain, Europe and Canada decided on Saturday to block Russia’s access to the international payment system SWIFT in a new series of sanctions against Moscow as it continues its assault on Ukraine.

SWIFT is the world’s leading international payments network.

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Here’s an overview of what SWIFT does and why it matters: find out more

Here are some comments from market analysts and banks:

HARRY BROADMAN, CHAIR OF EMERGING MARKETS PRACTICE, BERKELEY RESEARCH GROUP, WASHINGTON, DC

“Sanctions have a lot of weaknesses as we know from history. The more comprehensive they can be, the more they cover, the more you increase the likelihood of effectiveness. But in this case, it’s hard to understand what’s driving the process of Putin’s decision-making. The more sanctions we receive and the larger the coalition of people putting them in place, the greater the likelihood of success. But there is no formula.

FORMER CENTRAL BANK VICE PRESIDENT SERGEY ALEKSASHENKO, WASHINGTON DC:

“It means there is going to be a catastrophe in the Russian forex market on Monday. I think they will stop trading and then the exchange rate will be fixed at an artificial level like in Soviet times.”

“It’s much worse than [the Russian financial crisis of] of 1991 because we do not know under what conditions all this can be canceled. It is a very strong decision, the strongest that can be made and I consider it to be absolutely correct.”

ROSS DELSTON, AMERICAN LAWYER AND FORMER BANKING REGULATOR, ST LOUIS, MO:

“This is the closest thing to a declaration of war from a financial point of view. If there was a real hot war between the United States and Russia, these are the kinds of sanctions one would expect.

“This will result in Russia being considered radioactive by US and European banks, which in turn would be a major impediment to trade with Russia.”

JORDAN KAHN, PRESIDENT AND CHIEF INVESTMENT OFFICER, ACM FUNDS, LOS ANGELES:

“If we’re talking about market effects, I guess that’s going to be seen as a net negative…global banks are all interconnected at some point and so if that causes a run on Russian banks, or something like that, I think it’s a negative perception, combined with the US tightening the screws on Russia by adopting SWIFT.

“We already saw cyberattacks late last week… I think investors might be worried about further retaliation from Russia: are they going to try to escalate things there?

“And so I think the concern is going to be whether this kind of escalating retaliation comes and goes? … It could be positive in the longer term because it’s an attempt to try to pressure Putin towards a But in the short term, it seems like it’s kind of a net negative.

“There is perception and feeling, then there is reality and fundamentals. I don’t think that at the end of the day when banks report their earnings, especially for the whole year, I don’t think there will be endorsements or fees that they have to bear at the following that, but in the short term, from a sentiment and just fear perspective, I think US banks might be caught up in some concern about: is this having any ripple effects on the entire global banking system? »

CLAY LOWERY, EXECUTIVE VICE PRESIDENT, INSTITUTE OF INTERNATIONAL FINANCE:

“These new sanctions, which include the withdrawal of several Russian banks from SWIFT and the sanction of the Russian central bank, are likely to cause serious damage to the Russian economy and its banking system. This will most likely exacerbate ongoing bank runs and dollarization, causing a sharp sell-off and a drain on reserves.

“One of the biggest impacts on the global economy is likely to be on trade. While details of how the new sanctions affect energy are still emerging, we know the Sanctions against its central bank will make it harder for Russia to export energy and as a result, we could see commodity prices skyrocket.

DENNIS DICK, HEAD OF MARKET STRUCTURE AND PROPERTY TRADER AT BRIGHT TRADING LLC, LAS VEGAS:

“I think the whole world is trying to find a way to rectify or at least stop what is happening in Ukraine without physical intervention.

“Any kind of action they can do that obviously avoids us…us…sending troops, will probably be seen as positive by Wall Street.”

“Is the worst behind us for Wall Street? I tend to think that might be the case.

“I think anything the United States can do to limit Putin’s finances will be seen as positive by Wall Street.”

SONIA KOWAL, CHAIRMAN, ZEVIN ASSET MANAGEMENT, BOSTON

“You need a working banking system to have a working economy. This contributes to undermining the Russian economy.

EDWARD MOYA, SENIOR MARKET ANALYST, OANDA, NEW YORK:

“It will draw comparisons to what has happened to Iran and the crippling effect on its economy, and is more likely to cause a major shock to global financial markets when we open on Sunday evening.”

“I think a lot of traders were kind of convinced that the US and Europe weren’t taking a tough stance and were really focused on protecting the current economic situation and not really taking a hit. hard on the financial system. This action will be really hard to digest and it will really excite a lot of investors…much of the rebound that we saw in the second half of last week will be tested.

MICHAEL FARR, CEO AND FOUNDER OF FARR, MILLER & WASHINGTON LLC:

“Markets are looking for surprises, and it could be a surprise that’s not taken very well if it means a slowdown in international trade.

“This decision to remove Russia from SWIFT means that they are actually putting their money where they say it is. It reduces Russia’s ability to execute transactions around the world and cuts off its financial flows from most countries, it is therefore a severe step that should get their full attention.

“The problem will be the inflation that will be caused here, and the extent to which it can really slow down the European economy. It could create headwinds if it continues again and again.”

PAUL MARQARDT, ATTORNEY AT DAVIS POLK, WASHINGTON DC:

“Getting kicked out of SWIFT doesn’t make transactions impossible, it makes them much more difficult – getting kicked out of SWIFT would significantly increase transaction costs.”

PHIL ORLANDO, CHIEF EQUITY MARKET STRATEGIST, FEDERATED HERMES, NEW YORK:

“We have called on the United States to deny Russia access to SWIFT and to sanction the purchase of Russian oil and gas. We can tighten the screws more. [Investors must] expect [Russia]if it is backed by an economic wedge, [to] to employ some form of cybersecurity against those who acted. This would increase market volatility, he said.

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Reporting by Davide Barbuscia, David Randall, Ross Kerber, Ira Iosebashvili and Matt Scuffham in New York and Boston; Catherine Belton in London; compiled by Megan Davies

Our standards: The Thomson Reuters Trust Principles.

Mary I. Bruner