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Switzerland Imposes EU-Style Financial Sanctions on Russia

Background

March 10, 2022 - Switzerland has decided to fully implement the European Union’s (EU) sanctions against Russia to ensure the integrity of its financial center. This means that internationally active Swiss banks and insurance companies, as well as the stock exchange and commodity firms, will be keeping a close eye on international sanctions and implementing them.

Motivation

The EU sanctions were introduced in response to Russia’s actions in Ukraine, and Switzerland has decided to follow suit in order to maintain its reputation as a neutral financial hub. The country is also home to one of SWIFT’s data centers, which could potentially be affected by the sanctions.

Scope of Sanctions

According to the Federal Department of Finance (FDF) and the State Secretariat for International Finance (SIF), Swiss legislation is technology-neutral and covers both traditional securities and cryptoassets. This means that both are included in the ordinance for adopting EU sanctions.

Limitations on Independent Sanctioning

However, Switzerland’s ability to independently sanction Russia is limited by its Embargo Act, which does not give the Federal Council the power to impose sanctions on its own. Instead, the country will comply with EU and US sanctions, as well as those imposed by other international organizations.

Potential Impact on Payment Transactions and Financial Sector

The exclusion of Russian banks from the SWIFT system could have collateral damage for payment transactions and the financial sector as a whole. Uncertainty could arise if the sanction is not clearly defined, which could impact Swiss companies that rely on smooth payment transactions with Russian clients or suppliers.

Sanctions on Banks

Swiss banks are also affected by the sanctions, as they must keep a close eye on international sanctions and implement them in order to maintain their reputation and avoid legal consequences. The FDF and SIF have stated that Swiss banks will not accept deposits or pay out funds to those on the EU sanctions list.

Financial Relations with Russia

In terms of financial relations with Russia, Switzerland is not a major partner. Russian direct investments in Switzerland account for only 1% of foreign direct investment in the country, and less than 2% of Russian central bank money is held at Swiss banks.

Measures Against Russian Central Bank

Switzerland has adopted a set of measures against the Russian central bank, including restrictions on trading in securities, loans, and issuance of securities. The country will also apply the EU’s third package, which restricts the central bank’s access to its foreign exchange reserves.

Conclusion

In conclusion, Switzerland has imposed EU-style financial sanctions on Russia in order to maintain its reputation as a neutral financial hub. While the impact of these sanctions may be limited, they are an important step in maintaining international stability and avoiding any potential risks or consequences for Swiss banks and financial institutions.

Key Points:

  • Switzerland is implementing EU-style financial sanctions against Russia
  • Sanctions include restrictions on trading in securities, loans, and issuance of securities
  • Swiss banks will not accept deposits or pay out funds to those on the EU sanctions list
  • Financial relations between Switzerland and Russia are limited
  • The country is adopting measures against the Russian central bank to restrict its access to foreign exchange reserves.