Banks reported problems with the transfer of yuan to the EU and the US

Russian banks faced a ban on making transfers, in particular in yuan, to Europe and the United States through the Chinese Bank of CHINA . The share of such shipments is small, but private investors and businesses could use them , experts say

The Chinese Bank of China has limited the conduct of foreign currency transfers from RUSSIA to the banks of the European Union, the usa, Great Britain and Switzerland. RBC was told about this by representatives of Modulbank and Finam, in which Bank of China is a correspondent bank. UniCredit Bank also announced the restrictions.

The MarketOverview TELEGRAM channel drew attention to the fact that Modulbank warned its customers about the suspension of transfers in Chinese yuan to banks in the European Union, Switzerland, Great Britain and the USA. Pavel Semenov, Chairman of the Board of Modulbank, confirmed to RBC that the credit institution had sent such a notice to customers. According to him, such restrictions affected all banks that use the Bank of China as the main correspondent bank for transfers in yuan. Modulbank, which specializes in servicing small and medium-sized businesses, uses a correspondent account with the Bank of China only for yuan transfers.

Finam Bank, which is part of the investment group of the same name, has stopped accepting orders for the transfer of funds in yuan, dollars, euros and Hong Kong dollars through correspondent accounts of Bank of China since June 13, Dmitry told RBC Lesnov. The exception, however, is transfers to beneficiary banks of the Bank of China group, he added. Semenov also confirmed this: “You can make a transfer to banks of the Bank of China correspondent network. For the rest of the banks, we are working on an alternative route.”

“The decision was not made by China, but by the EU and US parties. Thus, they are trying to carry out sanctions pressure by blocking alternative channels in the form of the yuan,” Semyonov believes. According to Lesnov, these restrictions are associated with the risk of secondary sanctions or other restrictions on Chinese banks, which could be threatened with closing their own correspondent accounts with US and European banks.

UniCredit Bank also spoke about a message from the Bank of China about restrictions on payments in yuan. “From June 13, 2023, the Bank of China ( Russia ) does not accept payments in Chinese yuan in favor of recipients who are serviced by banks in the EU, Switzerland, the UK, the USA (including foreign branches of banks in these countries), with the exception of payments in favor of customers banks of the Bank of China group in these countries, ”the publication on the bank’s website says.

Correspondent bank - a bank that fulfills the correspondent's instructions for payments and settlements through specially opened correspondent accounts or through the accounts of correspondent banks in a third bank.

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Who is affected by the restrictions?

RMB transfers could, in particular, be used by clients of the Interactive Brokers (IB) brokerage company, one of the few brokers in unfriendly countries that continue to work with Russian clients, but do not accept transfers in rubles. After the imposition of sanctions on a number of Russian banks and their disconnection from SWIFT, Russian investors faced difficulties in replenishing brokerage accounts with IB and withdrawing money from them. As follows from the recommendations published in the profile chats of Russian IB clients, recently Raiffeisenbank, BCS Bank and Finam have been used for transfers. Basically, transactions were made in yuan, since transactions with this currency are subject to the lowest commission and are lower than the requirement for the minimum size of the transaction.

A representative of BCS Bank (on its website it is indicated that it uses Bank of China for transfers of yuan and other foreign currencies) told RBC that there are no restrictions on the transfer of yuan. “Transfers in yuan from BCS Bank are stable, and their volume is growing,” he stressed. Raiffeisenbank did not respond to a request.

In June 2023, several IB clients in a profile chat reported the return of yuan transfers sent through BCS Bank. At the same time, other clients noted that they did not experience any difficulties and the applications they registered for money transfers to an IB account were completed within a few days. Lesnov from Finam admitted that transfers could go through for some of the clients of the American broker. We are talking about those cases when an investor from Russia is assigned to an IB office not in the eurozone or the USA. “If this is a Hong Kong office, then the payment in yuan should go through. But it can be unequivocally stated that it will become much more difficult to transfer currency to Russian IB clients,” concluded Lesnov.

According to Semyonov, yuan transfers to the EU and the US are a rather exotic phenomenon in general, such operations account for 3% of the total yuan transfers. The share of transfers in yuan to Western countries is small, confirms Ekaterina Semerikova, a leading researcher at the blockchain and fintech laboratory of the Skolkovo School of Management: “The main transfers are most likely related to commercial activities and payment for goods or services when working with companies whose accounts are opened in banks Western countries."

Foreign currency transfers to Western countries through a Chinese bank could be carried out by Russian businesses for settlements on foreign economic transactions in the absence of other legal methods, Kira Vinokurova, special adviser on sanctions issues at the Pen & Paper Bar, agrees. “Given that Russian banks are disconnected from the SWIFT system, even non-sanctioned Russian companies cannot make the necessary transfers,” she emphasizes.

Why Bank of China could impose restrictions

“In general, such a policy of Bank of China is part of a global trend of banks from friendly countries to limit the operations of Russian persons. Only in recent months, similar restrictions have been introduced by banks from the UAE, Kazakhstan and other countries,” Vinokurova argues. She added that, as part of the international banking system and dealing in foreign currencies, including the DOLLAR and the euro, Chinese banks cannot and will not completely ignore Western sanctions , even despite friendly relations with Russia and loyalty to Russian clients.

Bank of China could introduce restrictions due to fear of secondary sanctions from Western countries, although restrictions on transfers to EU banks do not fit into this logic, Ruslan Chermit, partner at KLP Legal, draws attention: “At the moment, European sanctions regulation, in contrast to from US law, does not provide for the possibility of imposing secondary sanctions. Such a possibility, according to EU officials, is only being discussed.”

RBC sent a request to the Bank of China.