At the time of writing this article, six days of the military confrontation between Russia and its neighboring country Ukraine have passed, the number of casualties of both armies is counted in the thousands, while the intense bombing of the main Ukrainian cities, takes a terrifying number every time. largest civilian Billions of dollars, invested in weapons, used to destroy buildings, facilities, and lives, which would take many years to recover and return to what it was before.
War, whatever its justification, only leaves behind a trail of death, destruction, and desolation. There are no winners in any armed conflict, nothing is as ridiculously perverse as trying to build something from the ashes of death and devastation.
As part of the pressure mechanisms of the international community to force the Russian government to cease its efforts to invade Ukraine, the exclusion of Russia from the international interbank communication system known as SWIFT has been requested, which is why on this occasion I would like us to know a little about the operation of this financial communication mechanism and how said exclusion could affect, not only the Russian economy but also the world economy.
What is the Society for World Interbank Financial Telecommunication (SWIFT)?
SWIFT is an interbank messaging system that allows financial transactions to be carried out between the different banks in the world. This system provides a secure means of information between banks that allows the execution of financial exchanges between the different banks of the countries of the world, as well as foreign exchange operations.
Founded in 1973, this global financial communication channel connects more than 11,000 banks in more than 200 countries around the world, is headquartered in Belgium, and is governed by EU law. The SWIFT, as an organization, is currently jointly owned by more than 2,000 banks and financial institutions in the world and was created by American and European banks, who did not want a single institution to develop its system and create a monopoly in the system of financial exchanges. global.
The organization is supervised by the National Bank of Belgium, together with the main central banks of the world, which of course includes the US Federal Reserve and the Bank of England, among others.
How does SWIFT work?
Suppose we wanted to pay a supplier in Europe for the acquisition of certain merchandise that we wish to import to America. Our money, deposited in dollars in an American bank, needs to “arrive” in euros at the bank account of our European supplier. make this possible?: using the SWITF system.
All banks in the world, to communicate and understand each other, adopted this interbank communication standard called SWIFT. To understand it thoroughly, SWIFT would be a kind of "language" that allows banks to understand each other. A SWIFT message contains, for example, information on the identity of the person making a payment and the beneficiary, as well as the corresponding account numbers, so that any transfer and exchange of funds can be completed.
It must be clear that SWIFT messages are only used for communication between banks, that is, they describe the characteristics of the operation to be carried out, however, each bank, according to said information received, is responsible for settling or processing independently, each financial operation that is requested of them. It is estimated that around 42 million of these SWIFT messages are sent and received daily.
The main reason why SWIFT is often known is because of the bank codes, which are the ones used to make or receive an international transfer if the bank is a member of SWIFT. Each bank has an international ISO 9632 code that identifies it in the system. The SWIFT code of a bank is made up of the country code, the bank code, and a series of additional data, such as the location or type of branch. |
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How would the expulsion of Russia from the SWIFT system be carried out? How would this measure affect the Russian economy and the world economy? Why is it considered a kind of financial “nuclear bomb”? We will be developing these questions and their answers in the next article in this series, if you want to comment or add more information about such an interesting topic, I invite you to chat in the comment box.
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