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Russian rouble plunges amid Ukraine conflict

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4 years ago

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Sberbank Europe AG, which had total assets of €13.64bn (£11.4bn; $15.2bn) at the end of last year, along with its Croatian and Slovenian units, suffered a rapid deposit outflow in recent days and is likely to fail to pay its debts or other liabilities, the ECB, which is the lenders’ supervisor, said.

Analysis

In the first day of trading since harsh new sanctions were imposed, the Russian rouble plunged to a new record low against the US dollar. The euro sank more than 1%, while the price of oil surged.

The measures introduced this weekend increase the financial and social costs of Russia’s invasion of Ukraine.

Russians are already waiting in long lines, worried that their bank cards may stop working or that limits will be placed on the amount of cash they can withdraw.

And some of the European operations of Sberbank, the Russian state owned bank, are failing according to regulators.

The new ban on the Central Bank of Russia’s ability to use its roughly $630bn in foreign reserves undermines its ability to defend the rouble. Inflation is likely to go up because of the currency’s weakness.

This leaves the central bank with a few options, including raising interest rates or limiting the amount of money that can be brought into or out of the country.

 



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