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20 Dec, 2018 14:01

Major Russian bank ready to shut off Visa & Mastercard, halves dollar holdings

Major Russian bank ready to shut off Visa & Mastercard, halves dollar holdings

One of Russia’s state-run banking giants sanctioned by the US, Promsvyazbank, has brought its security deposits payable to international payment systems – Visa and Mastercard – down to a minimum.

The measure is set to be implemented by converting domestic banking transactions to Russia’s Mir payment system, launched by the Central Bank of Russia in 2015, a year after Western sanctions against the country were introduced.

Russia’s ninth biggest financial institution has also reduced its foreign-exchange holdings, according to Promsvyazbank president Pyotr Fradkov, as quoted by Russian business daily Vedomosti.

Security deposits are commonly used as proof of intent for lenders to guarantee fulfilment of their settlement obligations. The amount of such a deposit depends on the bank’s daily turnaround.

“We have carried out the necessary work with Visa and Mastercard. Our partners agreed with the measure and are ready to work with us in the same mode,” Fradkov told the media. “We are not cancelling work with Visa and Mastercard. There haven’t been any reasons for that yet.”

“Security deposits are still presented in the payment systems, so we deliver on our commitments,” he said, stressing that the volume of the deposits had been reduced to their minimums.

According to Fradkov, Promsvyazbank is currently setting up work with Russia’s national payment system Mir and its operator Russian National Card Payment System.

The bank chief added that the share of active foreign exchange assets operated by the bank shrank from 17.5 percent to 6.8 percent, while passive assets were reduced from 12.6 percent to 5.7 percent.

Earlier this year, Promsvyazbank, which was previously privately owned, was bailed out by the Central Bank and then chosen to service Russia’s defense sector needs. The bank’s latest move comes as part of Russia’s efforts to protect its financial system from the risk of a further tightening of US sanctions.

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