The Russian ruble fell by 40 percent on Monday after unprecedented international sanctions were announced against Moscow’s financial system for Vladimir Putin’s invasion of Ukraine. The European Central Bank revealed that Russia’s European branch of Sberbank was “bankrupt or likely to go bankrupt” due to deposit withdrawals.
According to the Guardian, which quotes several analysts, the “complete collapse” of the Russian currency is expected and the European branch of Sberbank, a state-backed bank, is “bankrupt or liable to go bankrupt”.
Analysts at Singapore’s Robobank consider that “there could be a complete collapse of the ruble” after the assets of the Central Bank of Russia are frozen, meaning it cannot sell foreign currency reserves to support the ruble. Volodymyr Zelenskiy told the British prime minister that the next 24 hours would be a “crucial period” for his country. With Boris Johnson stressing that the UK will do everything to ensure that allied support “reaches Ukraine”.
The ruble’s fall marked the beginning of a day that promised to be turbulent in world financial markets. The US dollar gained against all other currencies.
The price of a barrel of WTI crude rose by more than five percent in the first transactions, also today, showing the nervousness of the markets in the face of a probable energy crisis, following the conflict in Ukraine.
The new sanctions against Russia, which include the withdrawal of some Russian banks from the Swift international payments system, could deal a devastating blow to the Russian economy and make it difficult for Russian banks and companies to access the international financial system.
Signs of the first commercial downturns emerged this Monday when the European Central Bank (ECB) revealed that Sberbank’s European branch is bankrupt. Sberbank Europe AG is solely owned by the bank’s Russian parent company. Branches in Bosnia and Herzegovina, the Czech Republic, Hungary and Serbia would also be affected by bankruptcy, but are outside the ECB’s jurisdiction.
One of Russia’s largest banks, Austria-based Sberbank Europe AG and branches in Croatia and Slovenia, “suffered significant deposit outflows due to the impact of geopolitical tensions,” the ECB’s banking supervisory body said in a statement. .
“In the near future, the bank may not be able to pay debts or other liabilities as they mature,” he said.
The withdrawals led to a “deterioration of liquidity” of the bank and “there are no means available” that give a “realistic opportunity” to return to the institution’s coffers, he added.
The Austrian regulator FMA imposed “a moratorium” on the European branch, preventing “any withdrawals, transfers or other transactions” until at least Wednesday. Under EU regulations, individual deposits are guaranteed up to €100,000.
Since Thursday, Russia’s two largest banks, Sberbank and VTB Bank, have been subject to heavy US sanctions to severely limit international transactions.
On Sunday, Russia’s Central Bank announced several measures to try to support domestic markets and limit the damage caused by the sanctions.
Among the measures announced is the purchase of gold on the domestic market and providing unlimited liquidity. The requirements for obtaining loans will also be eased.
The Russian Central Bank also announced that it will order institutions to block attempts by foreign customers to sell Russian bonds or shares to try to keep prices stable.
Source: With Agencies