Deutsche Bank plans to leave Russia due to the current Ukraine crisis. The bank has been cutting down its business in Russia for quite a while and is finally exiting the country. This is a big deal, as Deutsche Bank is the largest bank in Germany. The step also shows how the European countries are opposing the Russian invasion from an economic standpoint of view.
Deutsche Bank plans to leave Russia
Deutsche Bank first started to reduce its exposure in Russia in 2014 when the country attacked Crimea, and the eastern Ukraine conflict happened. And it is finally leaving the country totally as a way to support the German government. The bank is also helping non-Russian clients wind down their Russia operations. All in all, they are not going to do any new business in Russia anymore.
They are not the first bank to do so. We also have Goldman Sachs, JPMorgan Chase, and Citigroup, who have either exited Russia or are reducing their business interactions as well. And in the future, we can expect many other banks to exit the country as well. As for Russian banks, things don’t seem good either as they have been cut off from the SWIFT payment system. Card companies like Visa, Mastercard, and payment companies like Paypal and Western Union have exited Russia as well.
The significance of the SWIFT system
SWIFT stands for “Society for Worldwide Interbank Financial Telecommunications.” It is simply a network of banks all across the globe that helps in cross-border payments between them easily and quickly.
Let’s say two users A and B, are using X and Y banks connected via the SWIFT network, and they are located in different nations. When A sends money to B, it will be transferred to a Nostro account which is owned by Y bank in the X bank. After the transfer happens, a message is sent to bank Y via the SWIFT network from X Bank. The message is then verified by Y Bank, and then the money is released into B’s account. Every bank in the network has a unique SWIFT code that facilitates this; otherwise, the process will take a lot of time.
What are your thoughts as Deutsche bank plans to leave Russia? And do you think Russia will be able to recover from the economic sanctions? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.
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