Russia's exclusion from SWIFTNet would have far-reaching consequences for Russia and Europe. CURENTIS describes the significance of SWIFTNet and looks at what specific effects banks in particular would face.
The SWIFTNet system is a system for international exchange of information between banks provided by the Society for Worldwide Interbank Financial Telecommunicaton.
SWIFTNet is used by over 11,000 banks worldwide and guarantees secure and fast interbank communication. In this process, SWIFTNet is used to process international payments by sending the necessary information about the transactions. The Society for Worldwide Interbank Financial Telecommunication is a cooperative of several banks and is governed by European law.
For day-to-day banking operations, the exclusion of Russian banks from SWIFTNet would have a significant impact:
- This measure would immediately bring payment transactions with Russia to a standstill. Payments from private individuals, companies and banks to or from Russia could no longer be executed.
- In the payments departments of European banks, there would be many returns of payments to Russia before execution. Payments from Russia could no longer arrive.
- The Russian central bank is already working on an alternative to SWIFT. The system is called the System for Transfer of Financial Messages (SPFS). However, it can be assumed that this system is still a long way from being able to replace SWIFT, and Russia will have to rely on cooperation with China for this. Possibly, there could still be arrangements with correspondent banks or banks connected to the SFPS system to post payments from Russia and make payments to Russia. However, this process would take several weeks. Payments that have not been made so far would then have to be made up. This would mean a high effort for the bank, both in terms of capacity and money, because the SFPS system is slower and more expensive than SWIFTNet.
It remains questionable whether it is worthwhile for European banks to look for an alternative to SWIFTNet for payment transactions with Russia, which is more expensive and slower and may only be needed for a certain period of time. For all European banks that have receivables from Russian companies or banks, after all that is a total of 56 billion EURO, an alternative solution for Russian payment traffic would probably be indispensable if one does not want to write off the outstanding receivables.
Former Russian Finance Minister Alexei Kudrin said a few years ago, in the wake of the annexation of Crimea, that excluding Russia from SWIFTNet would cause the Russian economy to collapse by five percent.
The five percent is probably still an optimistic estimate. Experience with Iran's SWIFT exclusion shows that the economic impact is massive. However, these will not only affect Russia, but also Europe and banks engaged in Russia.