What is the Swift banking system: what would a ban mean for Russia - will it happen?

Ukraine’s ambassador to the UK, Vadym Prystaiko, outlined a number of economic sanctions that his country wished to see put in place.

He’s said Russia should be blocked from the Swift payment system, and disconnected from Visa and Mastercard systems.

But what exactly is Swift? And what effect would a ban have on Russia?

Here is everything you need to know about it.

To give it its full name, the Society for Worldwide Interbank Financial Telecommunication is a messaging system for banks which works by linking up banks using standardised codes for payments.

The system does not facilitate payments, rather it sends payment orders which must be settled by the corresponding accounts, and transports financial messages in a secure manner.

Despite the system being criticised for its inefficiency, it is widely used around the world - in 2015, Swift linked more than 11,000 financial institutions in over 200 countries who were exchanging over 32 million financial messages per day.

Founded in 1973, Swift is headquartered in Belgium and owned by its member financial institutions, making it a “cooperative society” under Belgian law.

Banning Russia from Swift would be a major blow to its banks – Conservative MP Jonathan Djanogly has said that it would effectively return Russia to “the economic dark ages” – but is likely to be resisted by Russia’s Western creditors.

In theory, it would mean that Russia’s financial institutions would find it much harder to move and trade money with other countries, as they would no longer have access to Swift’s standardised format.

If you’ve ever tried sending money to a friend or relative in another country, you can understand the pain.

The first deputy chairman of the Russian State Duma’s committee on international affairs has said that banning the country from Swift would be a “serious” matter.

“We expected something more serious,” he added, “like switching from… Swift.”

Bans from the Swift system have been floated in sanctions discussions in the past.

But Swift refused to disconnect Russian banks from its network.

The current escalation of tensions between Ukraine and Russian is of a much higher profile, and with international condemnation of events even more widespread, it would be something of a PR disaster were Swift to refuse such measures again.

That makes a band much more likely, and it’s something that many officials are hoping will be brought in sooner rather than later.

For as widespread as that condemnation is though, there could be some objection to banning Russian from the network from certain countries.

Earlier in 2022, when possible sanctions in case of an invasion that had not yet happened were being deliberated, US and European officials said banning Russia from the financial system was not being considered.

Sources familiar with the talks told Reuters that banning Russia entirely was not under active consideration after running into major objections from European countries.

European lenders have expressed concern that banning Russia from Swift would mean that billions of dollars of outstanding loans they have in Russia would not be repaid.

Of course, those talks were happening when invasion was just a threat. Now it has actually happened, the landscape looks much different.

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