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Russians Removing Hard Foreign Currency From Banks In Fear Of Devaluation

Image by Ghirla
The Bristol Hotel in Yaroslavl. Currently occupied by the regional branch of the VTB-24 bank

Russian citizens are starting to withdraw large amounts of hard, foreign currency in an attempt to protect themselves from a possible devaluation in the country’s currency, the ruble.

Rumors have been circulating after certain officials declared that if the U.S. targets Russian banks with sanctions, depositors could possibly received rubles in exchange at the present exchange rate – meaning a devalued rate and a loss for investors.

Russia Raises Rates To Stop Ruble Decline And Confront Possible Higher Inflation After Talk Of More Sanctions Over Skripal Affair

New data has shown that the falling ruble, fear of new sanctions and a rumored freeze of foreign currency deposits pushed Russians to withdraw large amounts from their bank accounts last month. Customers took out rubles (to exchange for foreign currency) and dollars (to hold in cash).

The content of the August withdrawals was also significant: 100 billion rubles was withdrawn from ruble-denominated deposits while $1.5 billion was withdrawn from foreign currency accounts. This is unusual: normally people withdraw money closer to the year’s end – some deposits have expiry dates and January is also vacation season. It is likely that the majority of those withdrawing funds were state-owned banks: throughout August, the market was discussing the possibility of stronger U.S. sanctions that might limit the ability of such state banks to execute payments in dollars.

Russian money is now trapped: the risk of losing one’s savings in a new sanctions crisis is growing, while there are fewer and fewer ways of getting money abroad. European regulators should look out for new schemes, more complicated than those used in the Danske Bank case, reported Russian news outlet The Bell.

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