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Economic N-Bomb dropped on Russia, excluded from SWIFT

Published: 7th Mar, 2022


Exclusion of number of Russian banks by US, UK and European Union from SWIFT.


  • Western countries, led by USA, have imposed economic sanctions on Russia on the backdrop of its military attack on Ukraine.
  • One of the modes in which these economic sanctions have been imposed is the exclusion of Russian Banks from the SWIFT arrangement.


What is SWIFT?

  • Society for Worldwide Interbank Financial Telecommunication(SWIFT) is an organisation that provides services related to the execution of financial transactions and payments between banks of different countries.
  • Its principal function is to serve as the main messaging network through which international payments are initiated.
  • SWIFT does not actually move money, it operates as a middleman to verify information of transactions by providing secure financial messaging services to more than 11,000 banks in over 200 countries.
  • It is a Cooperative Society registered in La Hulpe, Belgium.

What is the organisational structure of SWIFT?

  • Work of SWIFT is overseen by Central Banks of 11 countries, they are- Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, the United States and Belgium.
  • It is a cooperative society under Belgian law and is owned and controlled by its shareholders, representing approximately 3,500 financial institutions across the world.
  • The shareholders elect a board of 25 independent directors representing banks across the world. This board governs the company and oversees its management.
  • SWIFT also has an executive committee which is a group of full-time employees headed by the Chief Executive Officer.
  • Each nation’s usage of SWIFT’s messaging service determines both SWIFT shareholding allocations and the number of board directors that each nation is entitled to.

Why has Russia been expelled from SWIFT?

  • Russian invasion of Ukraine is considered by the Western Countries to be a violation of international law.
  • Hence, as a censure against Russia for this act, US and its European allies have excluded a number of Russian Banks from SWIFT.

What impact will this step have?

  • Russian banks will now find it difficult to communicate with international peers which will result in slowing down trade the country’s trade and make its transactions costlier.
  • The companies and individuals of Russia therefore will find it harder to pay for imports and receive cash for exports.
  • Also it will be difficult for the Russian companies and individuals to borrow or invest overseas.

Are alternatives to SWIFT available?

  • Russia, in the year 2014, has developed System for Transfer of Financial Messages also called as SPFS. 
  • The above was set up, by the Central Bank of Russia, as an alternative to SWIFT but has struggled to be accepted as a messaging medium in international transactions.
  • China had also launched the Cross-Border Interbank Payment System (CBIP) in 2015 to internationalise the use of the yuan.
  • It allows global banks to clear cross-border yuan transactions
  • CIPS itself still relies heavily on SWIFT for cross-border financial messaging though its potential has been acknowledged by many experts and financial institutions.

Was any other country expelled from SWIFT?

  • Iran, in the year 2012, was banned from SWIFT.
  • It was done as part of sanctions against Iran’s nuclear programme.

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