EKO HOT BLOG reports that Russian Banks have lost around £21 billion during the first part of the year due to the impact of western sanctions.
Top officials at Russia’s Central Bank spoke about the huge loss suffered since Kremlin’s ‘special military operation’ in Ukraine.
Dmitry Tulin, first deputy chairman of Russia’s Central Bank, said around two-thirds of the losses came from foreign currency operations.
Mr Tulin said the country’s banks had lost a combined 1.5 trillion roubles ($24.86 billion) in the first six months of 2022, against the backdrop of the on-going invasion.
He said the loss came as lenders were blocked from trading in dollars, euros, and other currencies.
He told the Russian business newspaper RBC that the losses were concentrated among “systemically important” banks, which are the largest and have higher capital adequacy requirements.
Loss-making institutions recorded a combined 1.9 trillion rouble ($31.60 billion) loss, compared to profitable lenders that earned a combined 400 billion roubles ($6.65 billion) – combining to make the net loss of 1.5 trillion roubles.
Mr Tulin said it had become “more and more problematic” for Russian lenders to make payments in “toxic” currencies even when they were not directly targeted by sanctions.
He accused western banks of carrying out an “Italian strike” – another term for work-to-rule – by holding up payments for weeks and months through compliance procedures.
As a result, the Central Bank official said foreign currency accounts were now essentially rouble accounts pegged to the exchange rate.
He said: “Therefore, their attractiveness is falling, and the process of devaluation of the economy is accelerating.”
Russia’s financial system has been a key target of sanctions as the West tries to close the Kremlin’s war chest.
In June, Russia defaulted on its foreign debt for the first time since the Bolshevik Revolution in 1918 after the US blocked access to $600bn of funds in Wall Street banks, leaving it unable to make repayments.
The Central Bank’s assets have been frozen, blocking access to more foreign reserves, while many Russian lenders have been excluded from the Swift international payments system.
The UK has also frozen Russia out of its financial system, alongside its move to phase out all energy imports from the country.
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