Russia suffered on Monday the onslaught of the new Western sanctions, which put the Central Bank in the spotlight and include the expulsion of several banks from the Swift system, which resulted in the collapse of almost 30% of the ruble and forced Moscow to draw its arsenal to ensure financial stability.
In the early hours of the morning, the ruble collapsed in the Forex market against the dollar and the euro by almost 30%, a drop not seen since at least 1993 and 1994, respectively, something that the words of the Kremlin or the measures could not change either. taken urgently by the Bank of Russia.
The Russian president, Vladimir Putin, urgently met with the prime minister, Mikhail Mishustin, the governor of the Central Bank of Russia (BCR), Elvira Nabiúlina, and other heads of the Executive’s economic portfolios to analyze the situation and review the measures to stabilize the financial market.
they do not reassure
“They are severe sanctions, they are problematic, but Russia has the potential to compensate for the damage they are causing”, Kremlin spokesman Dmitri Peskov noted.
The Bank of Russia previously claimed to have found “cardinal changes in external conditions” for the sanctions,
By mid-afternoon, the currency had slowed down to around 23% for both the greenback and the euro, down to 103.16 rubles per dollar and up to 115.7 rubles per eurozone currency, but remained at record lows.
The Stock Exchange did not even open this Monday, because the Central Bank ordered it.
Thus, Russia avoided until at least tomorrow a major blow like the one suffered by the MOEX index last Thursday in response to Putin’s announcement that he was launching a military offensive against Ukraine and the first sanctions against the financial market and sovereign debt
The stock market then plummeted 45% and the main stocks dropped more than 58%.
No queues at the cashiers
Despite the significant devaluation of the ruby, in the Moscow banking entities visited by Efe an apparent calm reigned this Monday, without long queues in front of the ATMs.
“I’m here to get some cash because you never know”, commented a young Muscovite near one of the central offices of the largest Russian bank Sberbank, one of those affected by Western sanctions.
Meanwhile, in a subsidiary of the VTB bank, another target of the restrictions imposed on Russia due to the war in Ukraine, even fewer customers could be seen, especially in front of ATMs.
This bank sent its customers a text message to notify them of the possibility that the payment services of Apple, Google and Samsung are no longer available through the Visa and Mastercard payment systems.
The Central Bank has assured that debit and credit cards issued in Russia will continue to work within the country, but can no longer be used abroad.
Where there was uncertainty was in a VBT branch where various embassies and foreign companies have their accounts and which depend on international transfers.
This entity, controlled by the Russian State, will foreseeably be one of those affected by the decision of the European Union (EU), the United Kingdom, Canada and Japan to exclude a series of financial entities from the Swift international payment system, a blow unprecedented impact on Russia’s economy in response to the Russian invasion.
The SPFS, the Russian Swift
Nabiúlina on Monday invited, in a desperate attempt, foreign financial market participants to join the Russian analogue, called SPFS, which “can replace the Swift within the country”.
According to the TASS agency, the SPFS began operating in its entirety in 2017 and can transmit data in Swift format on any transaction in any currency, but does not depend on its channels.
Currently 38 foreign participants from nine countries are connected to the Russian system, an insufficient number to avoid the coup, since Swift brings together more than 9,000 members worldwide.
safeguard stability
In parallel, the BCR proceeded to take a series of measures to try to reassure the banks and the market.
Thus, the board of directors of the BCR suddenly raised the interest rate from 9.5% to 20% to support financial stability and protect the population’s savings.
Putin nonetheless gave the order to maintain the interest rates for the mortgages of the Russians.
The BCR also released accumulated capital reserves worth 733 billion rubles (6.245 million euros or US$6.963 million) for consumer loans and unsecured mortgage loans in rubles and foreign currency.
At the same time, it recommended that financial entities restructure their clients’ debt instead of imposing sanctions or fines if their financial situation deteriorated due to the sanctions.
On the other hand, it decided to prohibit brokers from selling corporate or foreign securities.
The Central Bank itself has not yet reacted to the sanctions of the European Union (EU), the United States and Canada against the monetary entity itself, which will prevent it from using its reserves to finance the war against Ukraine and strengthen the ruble.
Source: Gestion
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