The Implications of the Russia-Ukraine Conflict on International Banking

Abstract

This study analyzes the implications of the Russia-Ukraine conflict on the international banking industry. The study establishes that the economic sanctions imposed on Russia have gravely affected the international banking sector. Primarily, the study highlights that the US government implemented a sanction that prohibits the Central Bank of Russia from using the US dollar for payments. This move has rendered all the reserves by the Russian government and its citizens, which are kept in US dollars worthless and inaccessible, leading to huge losses for domestic and international banks. Moreover, this study outlines that banning Russian financial institutions from using SWIFT has limited the financial payments that are being completed in the global banking sector between Russian consumers and companies, and other merchants across the world. This study also establishes that the withdrawal of services by Visa, MasterCard, American Express, and Paypal from the Russian economy as a protest against Russia’s invasion of Ukraine has led to a decline in revenues for international banks. As a measure to mitigate the adverse implications of economic sanctions on sovereign states in the future, the study suggests the adoption of diverse global payment systems such as CIPS and SPFS, which can cushion the international banking industry against the potential adverse effects of being denied the right to use the world's dominant currencies and the SWIFT messaging system to make payments.