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banks—Bank Otkritie, Bank Rossiya, Novikombank, Promsvyazbank, Sovcombank, VEB, and VTB Bank—would be disconnected from the global financial messaging system SWIFT. Credit Bank of Moscow, Rosselkhozbank, and Sberbank were added on June 2.
Many Russian financial institutions experienced bank runs in the days following the introduction of sanctions, and the ruble fell against the U.S. dollar from around 75RUB/$ to above $120/$ in mid-March. The CBR responded by hiking its key policy interest rates by 1,050bps—from 9.5% to 20%—on Feb. 28. A stabilization and recovery of the ruble has since allowed the central bank to cut by a cumulative 900bps—300bps each on April 8, April 29, and May 26.
The CBR provided liquidity to the banking system in an unprecedented fashion, with the structural liquidity deficit reaching a record-high RUB5.4 trillion on March 9 through standing facilities as well as auction-based operations. That deposits at the CBR rose while liabilities increased sharply points to disruptions in the interbank market, i.e., banks—potentially foreign ones—were hesitant to lend to other institutions. The central bank’s measures were successful insofar as the Russian banking system stabilized relatively quickly, given the magnitude of the shock. The system’s structural liquidity has returned to a surplus similar in size to the post-sanctions level.
8.1.8 Bank news
Russian banks are running into problems with gathering compliance and due diligence information, as leading providers of compliance information services such as Risk & Compliance of Dow Jones are cutting ties with Russian clients amid the military invasion of Ukraine, RBC business portal reported citing two unnamed sources from unsanctioned banks. As covered by bne IntelliNews, Russia has quickly bypassed Iran as the most sanctioned nation after the military invasion of Ukraine. According to RBC citing Castellum.AI, from pre-invasion February 22 to May 30 the number of sanctioned Russian entities jumped from 2,800 to 10,500. Dow Jones Risk & Compliance is a global provider of best-in-class risk data, integrated technology solutions and due diligence services for managing regulatory and reputational risk. It is managing and updating complex information systems on sanctions and other regulatory limitations on a global scale. Other compliance services used by Russian banks are World-Check of Refinitiv and WorldCompliance of LexisNexis. Refinitiv announced it was pulling out of Russia back in March, while LexisNexis only condemned the military invasion of Ukraine. Without such software the compliance departments of the banks and other financial organisations would have to cross-check data manually, exposing the banks to risks of secondary sanctions due to breach of limitations. The Russian provider of compliance services is X-Compliance developed by Interfax. However, the analysts surveyed by RBC note that the standard industry practice is to run two systems at the same time, as one system alone is not 100% error-proof.
118 RUSSIA Country Report October 2020 www.intellinews.com