As the conflict between Russia and Ukraine continues to simmer without a resolution in sight, much of the rest of the world stands on edge. While the immediate threat of large-scale war in Europe is perhaps the most pressing concern, the ancillary fallout from the conflict is far-reaching.
Of course, the crisis is affecting the global banking industry in a number of ways. Perhaps most significantly is how Russia may be allowed to participate in the global financial system. Last week, UK officials said the country would press European Union leaders to exclude Russia from SWIFT, the interbank transaction system headquartered in Belgium.
According to Bloomberg:
"Blocking Russia from the SWIFT system would be a very serious escalation in sanctions against Russia and would most certainly result in equally tough retaliatory actions by Russia," said Chris Weafer, a senior partner at Moscow-based consulting firm Macro Advisory. "An exclusion from SWIFT would not block major trade deals but would cause problems in cross-border banking and that would disrupt trade flows."
The move underscores Europe’s growing concern at Russia’s latest incursion into Ukraine, with casualties mounting amid the threat that conflict descends into an all-out war on the EU’s eastern flank. The U.K. wants the EU to respond by ratcheting up sanctions against Russia to bring them more into alignment with those imposed by the U.S., said the official.
Going through with such a move would have serious implications for Russian banking and commerce. It would follow a similar move made in 2012 when restrictions to SWIFT were used as part of sanctions against Iran.
Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio