One of the curious features of the global push to impose sanctions on Russia’s banking system over the Putin government’s invasion of Ukraine has been the reticence of the board and senior management of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) to clearly say what they are going to do.
Despite a wave of announcements from governments in Washington, Amsterdam and London in recent weeks promising to “paralyse” the Russian banking system, the 24-member SWIFT board has largely kept silent about its timeline for excising Russian institutions from its platform.
The only public engagement from the Belgian cooperative came on Sunday, when an unnamed spokesperson issued a one line response to a flood of enquiries from international media outlets.
“We are engaging with European authorities to understand the details of the entities that will be subject to the new measures and we are preparing to comply upon legal instruction.”
While many journalists interpreted this comment as confirmation that a list of Russian financial institutions, including its central bank, were to be summarily cut from the SWIFT system, the last eight words cast a little doubt on when that might happen.
SWIFT’s management and board are regulated by a myriad of by-laws and corporate rules that need to be observed before individual banks or a banking jurisdiction can be severed from its service.
Many Russian banks hold shares in SWIFT and they have a nominee on the board – Moscow-based economist and financier, Eddie Astanin.
China also has a representative – Yaosheng Fan - an executive at the Bank of China.
The joint statement issued on Sunday by leaders of the European Commission, the US, Canada and the UK calls expressly for the “removal” of selected Russian banks from SWIFT.
According to SWIFT’s corporate rules, the board has the power to expel shareholders and accredited banks.
SWIFT’s directors will most likely have to assess the expulsion of Russian banks on a case by case basis – a requirement that will contribute to delays.
Given the eclectic composition of the board, debates on the removal of Russian banks from SWIFT are likely to be robust and could potentially take some time.
However, some level of pushback might also come from the SWIFT board’s long serving chairman – Citibank executive, Yawar Shah.
Shah has long championed the “political neutrality” of the SWIFT system and has repeatedly asserted the legal limits on his board being able to make decisions regarding sanctions.
For this reason the European governments seeking the removal of Russian banks from SWIFT will need to ensure the formal directions they give Shah’s board are legally considered and clear.
During the 2014 Ukraine and Crimean crises, SWIFT came under intense political pressure (from the UK government in particular) to sever the Russian banking system from the platform.
In a sternly-worded press release issued in October of that year, Shah highlighted the importance of SWIFT’s identity as “a neutral global cooperative company set up under Belgian law”.
“SWIFT and its stakeholders have received calls to disconnect institutions and entirecountries from its network – most recently Israel and Russia,” the