LONDON: British banking group HSBC, France’s Societe Generale and South Korean lenders are winding down relationships with a host of Russian banks, as they put Western sanctions against Russia into practice.
The US, Britain, Europe and Canada announced new sanctions on Russia on Saturday — including blocking certain banks’ access to the SWIFT international payment system — following Russia’s invasion of Ukraine.
An advisory notice from HSBC, seen by Reuters, told staff how they should apply the new global sanctions on Russia.
Headed “Action Require” and dated Feb. 27, it highlights the fact that the UK Office of Financial Sanctions Implementation had authorized “The wind down of certain transactions involving VTB Bank and certain UK subsidiaries.” VTB, one of Russia’s biggest banks, is affected by British sanctions.
The London Stock Exchange has suspended the membership of VTB Capital, which is owned by VTB. The suspension means VTB Capital can no longer trade on the LSE.
Two leading banks in South Korea confirmed on Monday that while they have not yet received specific guidelines from SWIFT, they stopped trade financing with at least seven Russian banks.
International departments of Chinese banks are likely to be monitoring their links with Russian banks, Han-Shen Lin, senior adviser for advisory firm The Asia Group, said.
Default on debts
Russia is extremely likely to default on its external debts and its economy will suffer a double digit contraction this year after the West launched sanctions unprecedented in their scale and coordination, the Institute of International Finance said on Monday.
The IIF estimates that half of the foreign reserves of the central bank, which on Monday hiked interest rates and introduced some capital controls, are held in countries which have imposed asset freezes, severely shrinking the firepower policymakers have to support the Russian economy.
Forex transfer ban
Russian President Vladimir Putin ordered a ban on foreign exchange loans and transfers by Russian residents to outside of Russia from March 1, the Kremlin said on Monday, in retaliation for economic sanctions imposed on Moscow by the West.
Putin also signed into a law an order for exporting companies to sell 80 percent of their forex revenues received from Jan. 1, 2022, on the market.
