Russia’s SWIFT alternative growing rapidly this year, central bank says

(This content was produced in Russia where the law limits coverage of Russian military operations in Ukraine)

By Alexandre Moelle

KAZAN, Russia (Reuters) – The reach of Russia’s alternative to the international messaging system SWIFT has grown at a record pace this year, the central bank said on Friday, as Moscow steps up efforts to resolve financial problems caused by penalties.

Extensive Western sanctions against many major Russian banks following Russia’s dispatch of tens of thousands of troops to Ukraine have severely limited lenders’ access to the global financial system. SWIFT supports financial transactions on a global scale.

Alla Bakina, director of the central bank’s national payment system department, said 50 new entities had joined Russia’s alternative system this year, bringing the total number to 440, of which more than 100 are non-residents.

“The financial message transfer system has seen an expansion this year as more foreign participants have joined it,” Bakina said at a banking forum in Kazan.

“More participants joined the SPFS in the first half of the year than in all previous years of the system’s existence,” she said.

The central bank does not disclose the list of countries whose institutions have joined the SPFS, Bakina said.

Some banks in Russia, including units of some foreign financial institutions barred from exiting by recent Kremlin laws, still have access to SWIFT and can process outbound payments.

More than 11,000 financial institutions in more than 200 countries and territories use SWIFT.

Sanctions have increased the use of SPFS and the issuance of Mir bank cards, Russia’s alternative to Visa and Mastercard, companies that have suspended operations in Russia and their Russian-issued cards have stopped working abroad .

Bakina said a third of all bank cards in Russia are now Mir cards.

But Mir – which means “world” or “peace” in Russian – faces headwinds abroad. Banks in so-called “friendly” countries – Turkey, Kazakhstan, Vietnam and Uzbekistan – halted Mir transactions after the latest round of US sanctions.

Washington has included the head of the National Card Payment System (NSPK) Vladimir Komlev on its sanctions list, prompting some foreign banks to withdraw their support.

Cuba, South Korea and a handful of former Soviet republics have authorized the use of Mir cards, but Komlev said on Thursday the NSPK had stopped disclosing the list of countries where the cards are accepted.

(Reporting by Alexander Marrow; Editing by Jan Harvey)

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