SWIFT is turned off from the inside – Newspaper Kommersant No. 47 (7492) of 03/21/2023

The Central Bank decided to disable SWIFT from transfers within Russia, the decision will take effect from October. According to market participants, after the largest Russian banks, which accounted for about 80% of domestic transfers, were disconnected from the financial information transmission system, its role has noticeably decreased. Experts believe that such a step by the Central Bank will help offset the possible shutdown of new Russian banks by SWIFT. But in some cases, SWIFT tariffs were more profitable, and banks will now have to reconfigure information transmission systems.

Bank of Russia informed on the decision of the board of directors of the regulator to ban the use of foreign financial messaging services from October 1 (European SWIFT remains the most popular of them). Such information will need to be “transferred through its own banking systems or services of third-party Russian companies, as well as the Financial Message Transfer System (SPFS) of the Bank of Russia.”

As the Central Bank explained to Kommersant, a number of banks still use SWIFT for domestic Russian operations, the deadline of October 1 is set to give those that have not implemented alternative exchange channels the opportunity to “configure internal processes for a seamless transition to new rules.” The Central Bank believes that SPFS “meets the potential increase in load” – traffic has tripled in 2022, “the number of users, including foreign ones, is also increasing.” As of mid-February, SPFS had 469 participants, including 115 non-residents.

According to Alexei Voylukov, Vice President of the Association of Banks of Russia, the logic behind shutting down banks from SWIFT is that “the West doesn’t see how money is transferred within the country” — this could push foreign regulators “to new ideas regarding sanctions.”

“In addition, all systemically important banks are already under sanctions, they are disconnected from SWIFT, and they account for 80% of transfers. It makes no sense to wait until internal traffic is turned off outside and unexpectedly, ”he believes.

The ROSSWIFT association acknowledges that in the context of the disconnection of the main Russian settlement banks from SWIFT, its role in making payments within the country has sharply decreased. “According to the results of 2022, the number of messages transmitted by Russian SWIFT users within the country decreased by more than two-thirds, which is quite understandable in the conditions of disconnection from the network of the main settlement banks – Sberbank, VTB, Rosselkhozbank, MKB and others,” explained the executive director of the association Roman Chernov. According to ROSSWIFT, almost 20 Russian credit institutions are now disconnected from SWIFT.

However, according to Mr. Chernov, banks continue to use the system, since it was widely used for making payments and settlements within the country, and automated banking systems are traditionally focused on SWIFT. “This is a convenient, familiar and cheap messaging system, but replacing it with SPFS or private solutions is not particularly difficult,” says Victor Dostov, head of the board of the Association of Electronic Money and Money Transfer Market Participants.

Market participants note that before Russian banks began to disconnect from SWIFT last year, messages within Russia accounted for 70-80% of all traffic.

At the same time, the head of the board of the Financial Innovations Association, Roman Prokhorov, claims that due to the tariff policy, by the beginning of hostilities in Ukraine, more than half of the domestic transfer traffic passed through the SPFS.

According to the data on the ROSSWIFT website, the cost of sending one message via the SWIFT system within the country is €0.0516 (about 4.3 rubles). The Bank of Russia charges RUB 0.8–1 for one message via SPFS. However, Alma Obayeva, a member of the board of directors of the National Payment Council, notes that SWIFT gave big discounts to large banks on domestic traffic. According to market participants, if SWIFT saw very high traffic between two banks, then discounts could go up to 100% to keep customers from switching to direct messaging over host-to-host connections.

Maxim Buylov