The price of the ruble collapses almost 30% due to economic sanctions on Russia

The ruble plunged today on the Forex market by almost 30% against the dollar and the euro after the announcement of the exclusion of some banks from the SWIFT international interbank communications system and the suspension by the European Union (EU) of transactions with the Central Bank of Russia (BCR).

Shortly after 09:00 local time (06:00 GMT) the ruble lost 28.34% against the greenbackwhose exchange rate stood at 107.48 dollars per ruble. The Russian currency fell by 27.02%up to 119.8 euros per ruble.

In the case of the dollar, This is a record drop since at least 1993 and in the euro it is the maximum collapse since at least 1994.

The exchange rate of the ruble began to fall in the face of the military offensive launched last Thursday by Russia in Ukraine. That day the Moscow Stock Exchange plummeted more than 33%.

In a first move The West sanctioned several Russian banks and sovereign debtand in a second decided to exclude some financial institutions from SWIFT.

Russia’s Central Bank tries to stem the bleeding

The Central Bank of Russia (BCR) today announced a series of measures to ensure the liquidity of the country’s banks affected by Western sanctions, such as the release of accumulated capital reserves worth 733,000 million rubles (6,245 million euros or 6,963 million dollars) for consumer loans and mortgages.

“As part of its countercyclical macroprudential policy, the Bank of Russia will dissolve the accumulated macroprudential capital buffer for consumer loans and mortgage loans unsecured in rubles and foreign currency from February 28, 2022 (733,000 million rubles as of February 1, 2022),” the monetary entity said in a statement.

He explained that the duration of the measure is indefinite.

In addition, it grants sanctioned banks the ability to make a decision on the non-deterioration of the evaluation of the financial situation of its clients when creating loss reserves, if the borrower’s financial situation worsened after February 18 and is due to the effect of the sanctions.

The BCR applies a similar measure for debt repayment, he said.

Gives Russian banks the ability not to worsen the assessment of the quality of debt serviceregardless of the evaluation of the financial position of its clients under restructured loans.

“The Bank of Russia recommends restructuring the debt, not imposing sanctions and finesif the financial situation of the borrowers deteriorated after February 18 as a result of the sanctions,” the institution notes.

Finally, banks can resort to valuations made before the imposition of sanctions to reflect the reserves for possible loan losses on its balance sheet if the collateral or guarantee is of quality I and II.

On the other hand, according to the economic daily RBK, the BCR decided to prohibit brokers from selling securities of foreign companies or individuals.

The Central Bank instructs “professional participants in the securities market who carry out brokerage activities” from 07:00 am on February 28 “and until the cancellation of this order suspend the execution of all client orders – foreign individuals and legal entities for the sale of securities & rdquor;says the document, signed by the vice president of the regulatory body, Philip Gabunia.

The Stock Exchange begins to operate normally at 06:50 (03:50 GMT), but the BCR indicated in a second statement that operations in the foreign exchange market, the money market and the repo market on the Moscow parquet will open at 10:00 (07:00 GMT) this Monday.

However, it clarifies that still evaluating the feasibility of opening operations in other marketsdepending on the development of the situation.

“The decision to open or not to open operations will be announced by the Bank of Russia at 13:00 (11:00 GMT) In case of a positive decision, the auction will open at 15.00.

The Bank of Russia is also introducing a temporary ban on brokers from executing transactions to sell securities on behalf of non-residents as of February 28, 2022.

The BCR takes these measures after the US, the European Union (EU) and other partners sanctioned several banks in the face of the war launched by Russia in Ukraine and decided on a second step exclude some Russian banks of the SWIFT international interbank communications system.

The EU also formalized last night the paralysis of transactions with the Central Bank of Russiaan unprecedented blow to the country’s economy in response to the invasion of Ukraine.

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The banks excluded from this system of interbank payments they will be among those that have already been previously sanctioned by the EU; on that list are Sberbank, Vneshtorgbank (VTB), Gazprombank, Russian Agricultural Bank and Vnecheconombank (VEB), Alfa Bank and Bank Otkritie.

The precise list of entities sanctioned will predictably be known this Monday.

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