Local banks explore ways as SWIFT ban takes effect
Banks in Bangladesh are on the lookout for alternative ways to continue banking with Russian lenders after their transactions with seven major financial institutions came under restriction from SWIFT from yesterday following the western sanction.
The United States, the European Union and some other countries have imposed sanctions on some Russian lenders and businesses over the country's invasion of Ukraine.
This led the SWIFT (Society for Worldwide Interbank Financial Telecommunication) to declare earlier this month that it would disconnect seven Russian banks from its network on March 12, as required by EU regulations.
Because of the suspension, Bangladesh's more than $1 billion annual trade with Russia will face uncertainty as payments for both imports and exports would face a roadblock until the private sector and banks find an alternative to keep carrying out transactions.
The curb on the transaction through the international payment messaging platform has also created worries about the timely implementation of the Rooppur Nuclear Power Plant.
The $12.65-billion-plant is the largest infrastructure project of Bangladesh and is funded by Russia. It is scheduled to open by 2024.
Amid the raging Russian-Ukraine conflict, managing directors of four banks and three officials of the central bank said that there are some scopes, including the use of a Chinese platform named cross-broader interbank payment system (CIPS), to retain banking relations with Russian lenders amid the ban.
But Bangladesh will have to take a decision to this end given its diplomatic ties with the countries and blocs that have introduced the sanction, they say.
Bangladesh Bank officials working on the issue say that the central bank has not taken any decision yet to this end as it is still observing the situation.
"We are discussing it almost every day to find out an alternative solution," said a BB official.
The BB asked banks to remain cautious in their dealing with their Russian counterparts to avoid punitive measures from the western nations and financial entities in case of violations of any global sanction.
VEB, one of the Russian lenders facing the embargo, has recently asked its Bangladeshi counterparts, including Agrani Bank and Sonali Bank, to suspend transactions through SWIFT.
Sonali Bank is settling transactions to import equipment for the Rooppur Nuclear Power Plant through VEB.
A managing director of a private bank said that the CIPS might be an alternative platform to do banking with Russia as it caters the same service as SWIFT is.
"As far as I know no local bank has had any participation in the CIPS. So, an agreement has to be signed with the Chinese entity," he said.
China's central bank launched the CIPS in 2015 as part of its efforts to widen the global use of the yuan and reduce dependency on US dollars for global transactions.
The CIPS, a messaging platform like SWIFT, can also move funds among the members.
The Chinese platform, however, does not have enough participating lenders though it served 672 overseas financial institutions, including from Russia, as of February, according to a Nikkei Asia report published on March 3.
It had only 76 direct participants, mostly overseas subsidiaries or branches of Chinese banks, it said.
Besides, the yuan's share in the global payment is only 3.2 per cent in terms of value. This means the Chinese currency is nowhere near the US dollar, which dominates global payments and settlements.
Emranul Huq, managing director of Dhaka Bank, describes opting for the use of another platform to do banking with Russian lenders as highly sensitive amid Russia's invasion of Ukraine.
"Banks can't take such a decision on their own. Lenders should follow the government's stance on the issue," he said.
Naser Ezaz Bijoy, chief executive officer of Standard Chartered Bangladesh, says that banks should follow the SWIFT's instruction with utmost caution so that they could avoid complexities emanating from the sanction.
Salehuddin Ahmed, a former governor of the central bank, urged the central bank to look into the matter so that the country could continue bilateral trade with Russia.
Russia has recently proposed Bangladesh use its own platform instead of SWIFT, he said.
"The government may consider it," he said, adding that the CIPS can be another option.
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