Russian Banks Eye CNY Solution as Central Bank Bars Forex Sales; New Sanctions Approved

Tim Alper
Last updated: | 4 min read
Source: AdobeStock / corlaffra


The Russian ruble has been thrown into disarray as the nation attempts to battle economic sanctions by effectively suspending the sale of most foreign currencies – while exploring the notion of allowing citizens to purchase China’s fiat yuan.

In a press release from the Central Bank, the top regulatory body announced that it had created a “temporary procedure” that entailed a ban on withdrawals of more than USD 10,000 from foreign currency deposit accounts.

The bank added that it would allow citizens to withdraw more than this amount – but only if the holdings were converted to rubles “at the exchange rate on the day” of the withdrawals. 

The measures have already come into force and “will be in effect until September 9, 2022.”

Commercial banks have also been ordered not to sell foreign currency to individuals in the aforementioned period.

The ruble plunged to unprecedented lows against the USD on the news, before bouncing back sharply. The size of the bounceback appears to be unclear, with TradingView data at the time of writing showing a 53% rise to the USD 0.12 mark and data showing the ruble at a much lower USD 0.08 with a rise of 10%.

The Central Bank claimed that citizens would be allowed to keep funds in foreign currency deposit accounts, claiming that this money would be safe and “accounted for” in the currency in which the account or deposit was opened.

It added that the terms and conditions for accounts would not change and that interest on holdings would continue to be calculated.

Purging the dollar from the Russian economy is a stated long-term goal for Moscow, but the Kremlin now appears keen to turbo-charge the process – and could seek to do so via the Chinese yuan.

With large-scale desertion of the ruble now seemingly an inevitability, Moscow appears keen to ensure that citizens do not flee to the USD. Instead, the CNY has been earmarked as an alternative.

Komersant reported that Russian banks could seek to reverse their fortunes with CNY deposits. It noted that VTB, one of the banks worst hit by American sanctions, has begun opening deposit accounts in the Chinese currency today, offering annual yields of 8%. The bank has begun offering CNY deposit services online and via its app.

Savings accounts have also been offered at Russian branches of the Chinese state-owned Industrial and Commercial Bank of China (ICBC). The latter is allowing Russians to open accounts with a minimum deposit amount of around USD 1.6, for deposits for up to three years, and with annual interest rates of 0.9-2%.

Komersant added that the ruble had “experienced one of the worst weeks in its history,” with the dollar “soaring by more than 22 rubles to 105 rubles to the USD.”

The market, it noted, was now being supported by little more than “restrictions imposed on foreign investors,” as well as interest rate hikes and requirements placed on the sale of foreign currency for Russian exporters, who tend to trade in the USD.

Stock market trading on the Moscow Exchange was suspended after shares tanked by over a third in February. Per The Wall Street Journal, citing the central bank, Russia’s stock market will remain closed Wednesday but trading on its currency market will open at 10 am Moscow time. It added that the money markets, which trade in short-term loans between banks and other financial institutions, and the repo market, will also open.

The sanctions imposed on the invading country are pilling up. Bloomberg reported today, citing “several diplomats” that the European Union approved a new round of sanctions aimed at Russia’s National Wealth Fund, fourteen wealthy individuals (including those in senior positions in a variety of companies), and more than 140 members of the upper house of the Russian Parliament

“The measures were approved by EU ambassadors and will be adopted by the Council of the EU shortly,” it said, noting that additional measures are being considered by the EU and several countries separately, citing a tweet on by the French representation to the EU. 

Per the Twitter thread, the approved measures would include three Belarusian banks as well – excluding them from the SWIFT international payments network. 

It added that the measures also “clarify the issue of cryptocurrencies and complete the list of technologies and goods that cannot be exported.”


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