Tribune. The disconnection of the Russian banks of the SWIFT courier system (Acronym of Society for Worldwide Interbank Financial Telecommunication) from March 12 was described in the press as “one of the most powerful tools available to the Western authorities to punish Russia ” But if unplugging Russian banks can send a clear political message, the economic impact of this measurement may not be as effective as being said.
SWIFT is a network linking more than eleven thousand financial institutions in more than two hundred countries. Since its creation in 1973, SWIFT has become synonymous with international payments. But it is important to note that SWIFT does not deal with payments, nor does it hold or transfers funds: it only allows the exchange of secure messages relating to payments between its members. Real payments are processed by banks, not by Swift.
No national incidence
It should also be noted that currencies are closed circuit systems. When a foreign transfer is made, the currency is not physically transferred abroad. Instead, banks provide accounts to their foreign counterparts and have their own accounts for their foreign counterparts. Banks rely on the network of “banking correspondents”, which consists of using several banks to ensure that the payment reaches the expected account holder.
This network allows banks to make payments in foreign currencies. Other payment service providers, such as money transfer agents such as PayPal or WISE, as well as emerging Fintech providers, also use the interbank network. SWIFT is the infrastructure underlying the network of banking correspondents.
However, the impact of the prohibition on Russian banks may not be as relevant as expected.
First, Swift being a messaging system, messages about fund transfers can circulate using other networks, although potentially less secure, including instant messaging or good old fax.
Secondly, the exclusion of SWIFT does not affect the national Russian banking sector. In 2014, the Central Bank of Russia has indeed set up a national payment card system (NPCS), whereby all Russian domestic payments are addressed. Russia has also created the National Network of Mir Payment Cards at the end of 2015, under the impetus of American and European sanctions related to the annexation of Crimea.
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