Chair of Financial Stability Board warns of ‘severe disruption’ if country cut off from payments system
The chair of the world’s most powerful financial watchdog has called on global leaders to “think twice” before imposing crippling sanctions on Russia, warning that the most punishing penalties run the risk of undermining global financial stability.
Klaas Knot, chair of the Financial Stability Board, told the Financial Times that suspending Russia’s access to the Swift international payments system, which underpins trillions of dollars of transactions a year, could result in a “severe disruption in payment flows”.
“When applying severe measures, one should always think twice and also be aware of the consequences,” said Knot, who is also head of the Dutch central bank.
Knot’s remarks came as Joe Biden, US president, used a speech at the White House on Tuesday to repeat warnings that the west would impose financial sanctions to exert “intense pressure on [Russia’s] largest, most significant financial institutions” if the country invades Ukraine.
Hopes of a diplomatic resolution to the crisis were bolstered earlier on Tuesday when Vladimir Putin, Russia’s president, said the country’s military would draw down some troops on the Ukrainian border to enable dialogue with the West.
When applying severe measures, one should always think twice and also be aware of the consequences
Klaas Knot
Biden responded by saying there was “plenty of room for diplomacy” but insisted that sanctions were “ready to go as soon [as] and if Russia moves”.
Cutting off Russia’s access to Swift, the Society for Worldwide Interbank Financial Telecommunication, is one of the potential sanctions being pushed by the US should the country attack its neighbour. EU officials say it is under discussion but unlikely to be included in the first round of measures.
Europe’s initial steps are more likely to be targeted sanctions on some of Russia’s biggest financial institutions, among them Sberbank, VTB, Gazprombank, Alfa-Bank and The Russian Direct Investment Fund. ...
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