Last week, after western sanctions against Russia expanded to include not only the first financial institution, Bank Rosiya, but also SMP bank whose main shareholders were on the sanctions list, unexpectedly both Visa and MasterCard halted providing transaction services to the two banks, without providing an explanation. Over the weekend, one of the banks got its full credit card functionality back after Visa Inc and MasterCard both resumed services for payment transactions for clients at Russia’s SMP bank.
As a reminder, SMP, which has about 100 branches covering more than 20 Russian cities, has co-owners Boris Rotenberg and older brother Arkady, who received large contracts in the Sochi Winter Olympics, and who were both added to the expanded US sanctions list, and as we reported before, SMP had said on Friday that Visa and MasterCard had stopped providing services for payment transactions for clients at Russia’s SMP bank. The bank said the decision to stop providing services by Visa and MasterCard was unlawful because the sanctions were imposed on shareholders, not the bank, which said it has no assets in the United States.
“We are glad that the two biggest international payment systems have heard our arguments and reversed their decision to block (SMP bank transactions),” SMP bank CEO Dmitry Kalantyrsky, said in a statement.
What was the purpose of this escalation? Simple: as Reuters reports, SMP Bank said on Monday around 9 billion roubles ($248 million) had been withdrawn by depositors since U.S. sanctions were announced last week.
Washington imposed sanctions on Thursday against 20 Russians close to President Vladimir Putin over Moscow’s involvement in the Ukraine crisis, including Boris Rotenberg and his older brother Arkady, the co-owners of SMP Bank.
SMP CEO Dmitry Kalantyrsky told a news conference that an estimated 4 billion roubles had been withdrawn by individuals and 5 billion by organisations.
In other words, the staggered escalations against Russian banks, to which credit card processors have joined without any specific reason, were meant solely to incite a bank panic and to promote bank run conditions. With SMP this succeeded partially, with quarter of a billion withdrawn, however hardly enough to cripple the bank. At least for now.
