SWIFT banking system

February 26, 2022
What To Know About The SWIFT Banking System

"Nuclear Option"?

Something you may have never heard about – but which impacts you daily – has become part of the strategy aiming to pressure Russia to stop its attack on Ukraine.
What SWIFT is and why it matters.

SWIFT

  • Society for Worldwide Interbank Financial Telecommunications (SWIFT)

  • Established in the early 1970s as a cooperative among 15 countries in order to link members' banks and generate smooth transactions. It is based in Belgium.

  • SWIFT doesn't hold any money. Think of it like a highway system, connecting 11,000+ financial institutions in over 200 countries so they can more easily do business.

Why SWIFT Matters:

  • Money is constantly moving between banks.

  • SWIFT provides a secure way for banks (and the money of individuals, businesses, governments) to do business. Government central banks use SWIFT as well.

  • Not all banks and financial institutions use SWIFT, such as some smaller, local banks. However, if a bank doesn't use SWIFT, its ability to do business easily, efficiently, and safely is impaired both domestically and globally.

"Everyone who now doubts whether Russia should be banned from SWIFT has to understand that the blood of innocent Ukrainian men, women and children will be on their hands too. BAN RUSSIA FROM SWIFT."

Ukrainian Foreign Minister Dmytro Kuleba. Banning Russian banks from SWIFT is not without risk. For example – Germany relies on Russia for energy resources. Cutting certain Russian banks off from SWIFT may impact energy suppliers that heat the homes of German citizens.

"… we commit to ensuring that selected Russian banks are removed from the SWIFT messaging system. This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally."

A joint statement released on Saturday, Feb. 26, from the U.S., France, Germany, Italy, the U.K., Canada, and the European Commission. Some Russian banks will be banned from SWIFT within the "coming days," though exact timelines – and banks – have yet to be identified.

Why This Matters:

  • Depending on how widespread this effort is, the move could immediately impact Russia's economy.

  • Russia's currency, the ruble, is in a "free fall" as it continues to decrease in value. This impacts not only the government but also Russian citizens.

  • Think of the global financial system like a spider web – cutting off certain threads may affect others in ways that are difficult to anticipate.

An interesting tweet from NBC correspondent Raf Sanchez shows the potential impact of SWIFT: "My hotel in Moscow asked me to settle the bill early because they aren’t sure if credit cards are going to work once SWIFT sanctions kick in.”

On Friday, French Finance Minister Bruno Le Maire said, "SWIFT is the financial nuclear weapon." On Sunday, Russian Pres. Vladimir Putin put his nuclear forces on notice, citing "aggressive statements.”

What is SWIFT and why it's being called the 'nuclear' option for Russian sanctions: https://abcnews.go.com/International/swift-called-nuclear-option-russian-sanctions/story?id=83131068

Background on SWIFT: https://www.investopedia.com/terms/s/swift.asp

Tweet from NBC correspondent Raf Sanchez: https://twitter.com/rafsanchez/status/1497710808683491342?s=20&t=7UKktQQxD_QEvx59_H3R7Q

White House joint statement with European Commission

France not opposed in principle to cutting Russia from SWIFT: Bruno Le Maire: https://www.politico.eu/article/frances-le-maire-not-against-cutting-russia-out-of-swift/

Putin puts nuclear forces on high alert, escalating tensions: https://apnews.com/article/russia-ukraine-kyiv-business-europe-moscow-2e4e1cf784f22b6afbe5a2f936725550

by Jenna Lee,

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