Business: New financial sanctions could spark a run on Russia’s banks

New Delhi, Feb 27 (IANS) Russia’s central bank is appealing for calm amid fears that new financial sanctions could spark a run on its banks – that is, too many people trying to withdraw money, BBC reported.

In a statement, it said: “The Bank of Russia has the necessary resources and tools to maintain financial stability and ensure the operational continuity of the financial sector.”

On Saturday, Europe, the US, the UK, and Canada announced that the assets of Russia’s central bank will be frozen. It has reserves of around $630bn.

The sanctions against the Bank of Russia would stop it from selling assets overseas to support its own banks and companies, BBC reported.

Europe, the US and its allies have also announced that a number of Russian banks will be removed from Swift, the international payment system which is pivotal for the smooth transaction of money worldwide.

Analysts predict that on Monday, when most markets reopen, the value of the rouble will drop – and Russians may rush to remove their money from banks, BBC reported.

“These new sanctions are likely to cause serious damage to the Russian economy and its banking system”, said Clay Lowery, executive vice president at the Institute of International Finance.

“This will most likely exacerbate ongoing bank runs .causing a sharp sell-off, and a drain on reserves.”

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