War and peace and cashback: How the Kremlin decimated Russia's financial advances

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Something must be up

The war with Ukraine is gradually permeating every aspect of ordinary Russians’ daily lives: it's not a matter of if, it's a matter of when. The moment of truth has already struck for some banks – and their clients can feel it too.

“Yes, these are the terms. We hope for your understanding,” Tinkoff Bank’s Twitter reply to the question about their exorbitant commissions quickly became a meme, mostly because of its precise language. An anonymous SMM manager of what was once Russia’s most fashionable bank accidentally gave an exhaustive characteristic to the nation’s entire banking industry.

The new rules, which the financial organization began to announce on June 9, came as a shock to its clients, who hoped that much would remain unchanged. A one-percent monthly maintenance fee for foreign currency accounts holding an equivalent of $1,000 or more is a restrictive tariff in any case – all the more so considering the national ban on the dollar and euro cash withdrawals introduced by the Bank of Russia.

A week later, the bank dropped the bombshell of a 3% commission on SWIFT transfers, no less than 200 dollar-equivalent units but not exceeding the amount of the transfer (these were the new terms the bank asked to show understanding for), but eased its savings account terms, raising the commission-free threshold to the equivalent of $10,000. On July 4, a monthly fee on brokerage accounts was imposed, on par with regular deposit rates. At the end of the day, storing large amounts of foreign currency with Tinkoff is no longer an option.

Transferring money abroad isn't possible either as the bank ceased to process outgoing SWIFT transfers in all currencies on July 6. Its press service claimed the restriction was temporary and had been introduced until October 1, but Russia has a long history of indefinite “temporary” difficulties. Meanwhile, incoming transfers are still processed. To mitigate the public outrage, Tinkoff committed to donating all of its commission earnings to charity. The bank promised to disclose specific beneficiaries in the fall, but its ethical stance became even more questionable. Essentially, the bank told its clients it was unable to service foreign currency accounts without an extra fee and then admitted it didn't need the money. Consequently, the clients were forced to donate to charity.

The strong barrage of criticism against Tinkoff was determined by its earlier popularity and came as a sort of reckoning for years of success. In reality, all banks switched to survival mode, even the largest player, Sberbank. Starting July 1, Sber introduced a 1.25% commission (calculated within the range from 30 to 150 rubles) on transfers from its cards to cards of other banks. The commission for dollar and euro accounts fluctuates in the range of $1-3. One could use the Faster Payments System (FPS), but commission-free transfers are still limited to 100,000 rubles. Alfa-Bank introduced a 1.95% commission on transfers to clients’ accounts with other banks back on March 16, setting a minimum fee at 30 rubles. Neither Sber nor Alfa-Bank charges a commission for SWIFT transfers – for the sole reason of not providing the service due to sanctions.

“We do not see why our clients would choose to move their money to other banks. We suggest that they see the benefits of our services for themselves,” Sberbank stated, justifying its decision. This surprisingly straightforward, even harsh language has a striking sincerity to it: the battle for customer loyalty and reputation is a matter of the past, and new objectives have taken its place.

Other major banks are offering less attractive conditions for foreign currency deposits as well, with Raiffeisen introducing a fee on accounts even ahead of Tinkoff. Uralsib, Citibank, Rosbank, and Bank Sankt-Peterburg followed suit. Yury Gribanov, CEO of Frank RG, believes that other market players may also have to initiate forced de-dollarisation of accounts and deposits, one way or another.

These developments fostered rumors about the upcoming confiscation of foreign currency from the population. To prevent panic, the authorities allowed banks to introduce negative rates on the foreign currency accounts of legal entities. The idea was brought to life in the form of account maintenance fees that exceed interest income. With the fees, lending institutions are compensating for the losses associated with foreign currency at the expense of businesses and not individuals, which results in less negative publicity. “Due to blocking sanctions, banks cannot increase their foreign currency assets or process foreign currency transactions. Negative rates will ease the burden on the financial system and facilitate the de-dollarisation of the economy,” explains the Ministry of Economic Development.

However, no one has been able to curb the trend. UniCredit Bank is charging a fee on its dollar, euro, pound sterling, franc, and yen accounts starting in August, and Gazprombank imposed a commission on accounts and SWIFT transfers on July 20.

Better, faster, stronger

After the annexation of Crimea, when the Russian economy fell behind on anticipated growth and the ambition to catch up with Portugal, the nation soon found another reason to feel proud. A few years later, many bank clients remarked with surprise that Russian banking, especially digital services, positively stands out on the international level. As early as in 2015, a total of three online-only banks competed in the market: Rocketbank, Touch Bank, and Tinkoff. Only Tinkoff has survived to date – and was once a smashing success.

In 2018, Deloitte Digital placed Russia in the top five digital banking countries in EMEA (Europe, the Middle East, and Africa), alongside Turkey, Poland, Spain, and Switzerland. A year earlier, in 2017, EY ranked Russia third in the fintech service market among the world's twenty largest markets. Importantly, banks were responsible for a considerable share of Russia’s international advances.

Fintech encompasses new services in the financial sector (such as algorithmic stock trading) and enhanced traditional services like payments and money transfers. Russian banks began to offer their clients the scope and level of services that are sorely missed by Russian expatriates at European lending institutions.

In 2018, Global Finance recognized Tinkoff as the world’s best consumer digital bank, Tinkoff Investment as the world's best investment management service, and Tinkoff Mortgage as the best digital mortgage service in Central and Eastern Europe. However, calling it Russia's “one and only” (after Andrey Loshak's documentary timed with the bank’s fifteenth anniversary) in terms of service quality would be an overstatement. Thus, in 2019, Global Finance lauded Alfa-Bank as Russia's best bank – a title confirmed in 2021 with a similar token of recognition from Euromoney Awards for Excellence. In the same year, Alfa-Bank topped the Markswebb rating as the Best Bank for Daily Tasks and Best Digital Office, interrupting Tinkoff's five-year-long hegemony.

Sberbank, whose service quality had been a laughing stock since the Soviet times (“You need to refer to the branch where your card was issued!”), received the Platinum Loyalty360 Customer Award in 2017 for putting clients at the heart of its business model, outpacing such brands as ExxonMobil, Domino's, Sony Pictures Entertainment, Stellar Loyalty, Dell Technologies, Choice Hotels, Nissan & Infiniti, MGM Resorts International, and many more. In 2018, Global Finance recognized it as the most innovative bank in Central and Eastern Europe and the winner in the Best in Social Media Marketing & Services category, which celebrates the most innovative and efficient communicative projects in digital.

The public attitude to Russia’s banks was vividly illustrated by the aborted merger between Tinkoff and Yandex. Even Oleg Tinkov himself admitted he was surprised by the unanimity of public comments. No one was thrilled about the deal; by contrast, clients thought Yandex would only make things worse. Eventually, the banker called it off.

Nevertheless, no matter how advanced an individual bank is, operating within one country makes a bank greatly dependent on its economy. Russia's GDP growth chronically lagged behind the global average, which negatively impacted assets. In 2019, even before the pandemic, Moody’s called Russian banks the worst by asset quality among developing countries. The main issue was the oversized share of non-performing loans – way higher than in South Africa, Mexico, China, Turkey, and Brazil. However, as the analysts pointed out in their review, the root cause was the low efficiency of the economy, not the banking models.

And yet, service-wise, such options as ordering a bank card online – including delivery – online loans, cashback, extras, and advanced technical support became business as usual in Russia. Russians, who are used to this level of service, are sometimes surprised that the situation abroad is wildly different. Thus, Russian investment banker Evgeny Kogan called for a realistic attitude when commenting on issues faced by recent Russian emigrants to Israel when trying to transfer their funds from Russia. He reminded that Israeli banks still use fax machines, reply to emails with intermittent success, and rarely answer phone calls. Ordering a credit card may turn into a many-day quest; its success depends on the responsible employee's diligence, and if they fail, there is no use complaining.

Putin-free banks

Russia’s banking industry enjoyed a special status for many years, although no one emphasized it. In a country where major economic assets had long since been divided among the chosen few (President Putin's friends he could rely on and reputable, loyal oligarchs), the financial sector was run by people whose ideology was somewhat distant from the new “elite”.

A vivid illustration is Herman Gref, Russia's chief public banker for the last fifteen years. Like Putin, he started at St. Petersburg Mayor's Office. Moreover, Anatoly Sobchak, the then mayor, had been his postgraduate academic supervisor at the Faculty of Law of St. Petersburg State University. Such connections ensured Gref’s swift advancement first within the city administration (where he met the future president) and then in the federal government, where he occupied the post of First Deputy Minister for Public Property. Putin's first cabinet featured the Ministry of Economic Development, which was created specifically for Gref’s competencies.

Gref is among the three Mayor Sobchak's associates who have climbed the highest during Putin's rule. The other two are Alexei Kudrin, former Minister of Finance and current head of the Accounts Chamber, and Anatoly Chubais. Although the latter did not owe Putin his advancement – but rather the contrary.

All three made an immediate contribution to the economic successes of Putin’s first two terms, which apparently gave them the reason to feel special. The feeling was not deceitful: in the 2010s, Chubais, Kudrin, and Gref stood apart from the servile mediocre officials who had begun to dominate the “political elite”. Even post-annexation, they continued to promote their agendas and priorities without being brought to heel.

With Kudrin’s guidance, Russia’s Accounts Chamber came to be the main critic of the nation's economy. Chubais dared question Putin's directives publicly even in 2021, and Gref remained demonstratively pro-Western. He drew inspiration exclusively from foreign corporations and their methodologies, dismissing Russia’s “special path” and “mysterious soul” out of hand. In 2017, he invited an Indian guru as a guest lecturer at Sberbank. A year earlier, he called for a comprehensive overhaul of the educational system, declaring that replicating the “old, Soviet, completely outdated education” based on stuffing children’s heads with knowledge was not the way forward for modern Russia.

As part of yet another rebranding and service enhancement effort, Sberbank released a presentation in which Gref posed as a visionary, the Russian counterpart of Steve Jobs. It was a bit of a stretch, but a bold attempt nonetheless, especially for a public official in 2020 Russia.

It's hard to pinpoint what made Gref believe he was entitled to a greater degree of freedom: Putin's misplaced sentimentality or a sort of gratitude for contributing to the economic growth of the early years of his presidency. One way or another, Gref didn’t feel like he had to march in step with everyone else. He still doesn't; or at least not to the extent of publicly supporting the war in Ukraine. He has not condemned former Sberbank employees who resigned after February 24 either.

The chief Russian banker's follies could have been compensated with trustworthy, patriotic administrators in other banks, but the Kremlin mostly avoided imposing such controls. Primary market players remained relatively autonomous and still made it onto the list of systemic banks released by the Bank of Russia on July 15, 2015. Along with Sberbank, the list featured subsidiaries of foreign organizations, such as Raiffeisenbank, UniCredit Bank, and Rosbank (which belonged to Societe Generale until April 2022), private banks such as Alfa-Bank, Promsvyazbank, and Otkritie, and state-owned banks: VTB, Gazprombank, and the Russian Agricultural Bank. The latter two were established to cater to the needs of the natural gas industry and agriculture.

As the pillars of Russia’s banking systems, these lending institutions could expect not only public scrutiny but also outstanding support measures in an emergency.

Until recently, Alfa-Bank – Russia’s largest private bank – was headed by Petr Aven, who had once been a minister of Egor Gaydar’s government, and its largest shareholder was Mikhail Fridman, the richest London resident in 2019. In 2017, Aven published a book titled “The Time of Berezovsky”. This may seem like a minor detail but people of his rank with connections in the Kremlin already trod carefully at the time. Dedicating a book to Putin's deceased enemy was inappropriate at the very least. In other words, the sector displayed a shortage of respect for the state.

Apparently, the Kremlin thought the situation called for an intervention. Its first victims were brothers Dmitry and Aleksei Ananyev, former Promsvyazbank owners who had once been nicknamed “Orthodox oligarchs” for Dmitry's active involvement in the affairs of the Russian Orthodox Church. In 2017, the Bank of Russia announced its bailout, and the Ananyev brothers soon became defendants in several criminal cases.

Meanwhile, Promsvyazbank was entrusted to Petr Fradkov, the son of Mikhail Fradkov, former prime minister and head of the SVR (Russia’s foreign intelligence service). Under his apt leadership, the lending institution became the backbone of defense industry funding. It’s logical to assume that the Kremlin needed a lender for military enterprises and, against the backdrop of tightening sanctions, decided to use an existing bank instead of creating a new one.

Nevertheless, in the latter half of 2017, the list of systemic banks came to include the private Credit Bank of Moscow, and in 2020, privately-owned Sovcombank and Tinkoff bank. Private organizations were still competitive, which is rare in today’s Russia. The subsidiaries of foreign banks were faring worse. Whereas their share in the joint authorized capital of Russia’s credit institutions amounted to 13.51% (407.3 billion rubles) in early 2017, it dropped to 10.96% (308.3 billion rubles) four years later, in January 2021.

As a result, government presence was pronounced but still permitted new players to enter the market. This might have been the case because Putin's friends and securocrats were not looking to establish leadership but needed pocket banks. Thus, Arkady and Boris Rotenberg controlled SMP Bank, while Yury Kovalchuk ran Rossiya, where Putin had been receiving his salary since 2014, as a token of support for the organization hit by sanctions.

The mistress of the Central Bank

A key figure in the making of Russia's banking as we know it is Elvira Nabuillina, who has headed the Bank of Russia for the last nine years. In 2015, Euromoney lauded her as the world's best head of a central bank, and The Banker (UK) awarded her a similar title in Europe. By that time, the experts had all the reason to praise her achievements.

Some six months after her appointment, the Ukrainian crisis struck: first the Euromaidan, then the annexation of Crimea and the armed conflict in the east of Ukraine, followed by a plunging ruble exchange rate. Any signs of panic or rigid administrative regulations could have made things worse, so Nabiullina bet on openness and transparency, forgoing the currency trading band and exchange rate interventions – and came out on top.

The economy shrank far less than anticipated, and the inflation rate dove below 6% as early as in 2016, which was unprecedented for Russia at the time. Most likely, her success helped her earn Putin's trust and a certain freedom of action for the entire regulator in carrying out reforms.

Back then, the Bank of Russia prioritized clearing the banking sector from rogue players. Over 600 credit institutions have been liquidated or stripped of their licenses since the beginning of Elvira Nabiullina’s tenure. Meanwhile, the regulator has been seeking to level out the playing field and foster competition for the remaining players. Primarily, this meant weakening the historically tight grasp of Sberbank on the market. The key factors included battling the so-called “payroll slavery” (that is, the state-owned bank controlled the majority of payroll card programs, which was an artificial barrier for client migration to other institutions) and the introduction of the FPS, which offered the opportunity for other banks to challenge Sberbank’s reign over card-to-card transfers.

Nabiullina's persistence must have spurred on the appetites of other banks. Thus, from 2016 to 2021, VTB upped the share of loans to individuals in its assets from 0.1% to 19%. To that end, the organization, led by Andrey Kostin (another 1990s official who worked at the Bank of Russia during Boris Yeltsin's first presidential term), acquired the Bank of Moscow to go into consumer banking, and finally, VTB 24. Uniting its assets under one brand, the bank started advancing digital services and topped Skolkovo’s 2020 banking digitalization rating.

Russia’s third bank by scope of assets, Gazprombank followed a similar trajectory. One thing is certain: the market evolved through competition, not administrative measures. Tinkoff’s advances in retail banking thanks to new client services pushed state-owned banks in the only right direction: toward creating analogs and exploring their strengths. As a result, Sberbank, VTB, and Gazprombank began offering both stock trading services and virtual mobile operators.

Two years ago, Nabiullina identified a new threat on the path of banking sector evolution: overly powerful ecosystems that could leave dangerously little room for competition. She was therefore at the cutting edge of banking regulation worldwide because the West has not yet resolved the challenge of overly potent ecosystems either. The situation in Russia provided perfect opportunities for experiments and practical problem-solving, as Sberbank, Tinkof, VTB, and Yandex found more and more areas for expansion.

However, February 24 made all the inroads null and void, pushing completely different challenges to the forefront. Many expected Nabiullina to step down when the war began: in particular, Bloomberg wrote early in May that the President himself refused to accept her resignation. However, even if there had been any conflicts, they ended in nothing. Nabiullina continued working in the new circumstances, trying to put out the raging fire. She stopped wearing brooches she had used as signals at press conferences and donned all-black outfits, not saying a word about the war but refraining from criticizing the government.

«Everything we've been building for 30 years has been destroyed»

The numerous transformations undergone by the banking industry after the annexation of Crimea made us lose sight of the many missed opportunities. The first such opportunity is Ukraine as a market. Despite the continued presence of Russian banks in Ukraine, their positions notably weakened, and neither Nabiullina nor their management had a say in the matter. Only Alfa-Bank, which was not sanctioned, survived the 2014 crisis – but only just barely. Gref admitted in 2017 that he was actively looking for ways to withdraw Sberbank from the neighboring state because Kyiv's restrictive policies had put his Ukrainian subsidiary at a disadvantage. In 2021, he pointed out that a viable solution was yet to present itself and that the issue remained painful. VTB’s subsidiary in Ukraine was deemed insolvent in 2018, with its assets accounting for 0.6% of the Ukrainian banking industry.

Sectoral EU sanctions against state-owned Russian banks also thwarted their development plans. No matter how hard bankers tried to deny the impact of restrictive measures on their business models, they still had to forget about international expansion. In 2014, Sberbank Europe ran a chain of nine subsidiary banks in eight countries of Central and Eastern Europe. By late 2021, the situation had gotten worse, with Sberbank still being present in eight countries but looking to sell some of its subsidiaries due to sanctions. Moreover, it had been forced to sell its Turkish subsidiary, DenizBank A. S.

Russian banking remained a thing in itself – advanced but unable to advance. Technology-intensive but unable to transform this into an international competitive edge. Looking back from 2022, their standing was good enough, but it's a matter of the past now.

The attack on Ukraine delivered a blow on the entire banking industry, and the blow was hard, almost on par with drawing the iron curtain: a ban on SWIFT transfers for the largest banks, the withdrawal of Visa and Mastercard, which made Russia-issued card useless abroad, the sanctions imposed on credit institution owners and executives, and Western organizations selling their Russian subsidiaries. Similarly, Russian institutions had to say goodbye to their scarce European subsidiaries. VTB lost control of Europe-based VTB Bank Europe SE back in April, and Sberbank decided to leave Europe in March because of the capital outflow. Further on, as Sberbank learned in June, keeping its Kazakh business was no longer an option.

Foreign banks did their best to withdraw from the toxic market with minimal damage and most likely regret having taken the risk of operating in Russia. Thus, Italian UniCredit looked for clients in India and China because Russian players weren't prepared to pay much, and the Italian top managers were concerned with mitigating sanctions risks. Vladimir Potanin’s Interros was named among the contenders, but his offer is yet to impress the Italians. Another challenge is the parent organization's desire to secure the right of buyback if the geopolitical situation takes a turn for the better.

However, Potanin succeeded in purchasing Rosbank from Societe Generale (apparently, the French prioritized speed over profit) and Oleg Tinkov’s stake in the Tinkoff Group. Tinkoff’s founder referred to the offer as “peanuts”, allegedly within 3% of its real worth, but admitted that his hand was forced by the looming threat of nationalization. According to Tinkov, after he’d publicly condemned the war, the Kremlin reached out to him directly. Potanin had a different opinion of the deal, pointing out that hundreds of millions of dollars could hardly be called “peanuts”.

Raiffeisenbank considered withdrawal too but the size of its capital would have made the process particularly complicated. Hungarian OTP Group assures it has no plans to leave Russia but admits it has been facing pressure for its choice to stay. As our sources inform, the group has begun downsizing its activities in Russia, primarily due to the grim prospects of the Russian economy.

And yet, regardless of their eventual decision, their ship seems to have sailed. On July 15, Deputy Minister of Finance Alexei Moiseev announced the government’s decision to block the sale of foreign bank subsidiaries in Russia. He justified it by the barriers faced by Russian banks in their foreign operations due to sanctions. A day prior, it became known that legislators were considering a mechanism to transfer operative control of foreign banks to Russia while leaving the credit institutions in the formal ownership of their parent companies. As a result, no one will be compensated for their Russian assets.

The flight of foreign banks was accompanied by an exodus of top managers. In the first few days of the war, Sberbank lost its first deputy CEO Lev Khasis and senior vice-president, CTO David Rafalovsky. The month of May saw more executive-level resignations among heads of units: Finance (Alexandra Buriko), Sales Network (Sergei Maltsev), and Wealth Management (Natalia Alymova). They were followed by senior VP, head of SberCIB Andrei Sheremet and senior VP, curator of Strategy and Development Yulia Chupina

Gazprombank VP Igor Volobuev left for Ukraine and joined territorial defense forces. The executive director of Gazprombank’s IT department Ruslan Dostovalov resigned for ethical reasons. Once he was included in the sanctions list, Petr Aven chose to give up his top post at Alfa-Bank. “Our business has been razed to the ground. Everything we’ve been building for thirty years has been destroyed,” he confessed to the Financial Times.

The army boot of the state instead of Nabiullina's tactics

Nevertheless, all of these details are collateral to the main threat: from now on, the government is most certainly preoccupied with the banking industry. Late in March, Gref and Kostin drew up a letter to Prime Minister Mikhail Mishustin on the anticipated losses from contributing to the planned economic relief measures. According to their estimates, the amount borders on 600 billion rubles (~$9.7 billion), with many steps contradicting free market principles, in violation of the earlier agreement. The banks are expected to pay for the nationwide loan repayment holiday (a loss of 104 billion rubles for the two banks), a business relief program (another 200 billion rubles), and the nationalization of planes, with the latter policy potentially resulting in the loss of 100 billion rubles for each.

The battle against the outflow of capital, which the Bank of Russia had been advancing for years, is back to square one as well. Thus, parallel import, which was once illegal, has been authorized for many types of goods. Banks used to treat such actions as changing the purpose of the advance payment or paying an unknown organization as potentially fraudulent. Today, the need to work around the sanctions provides a handy smokescreen, and in some cases, comprehensive checks are impossible because transactions are processed abroad. As a result, a bank could be charged with both impeding parallel import and overlooking murky transactions. Both accusations harbor massive risks: whereas rigorous checks require time and financing, any disruptions will give security agencies a pretext to pay a visit to the bank.

Naturally, in a time of war, banks won't get any leeway the way they did before. Even Elvira Nabiullina may take the fall unless she manages to replicate the 2014 miracle. The first alarm of uncertainty rang on May 26, when the Central Bank cut the key interest rate from 14% to 11% in an extraordinary meeting. While logical in the context of a disproportionately, dangerously strong ruble, the decision looks suspicious for several reasons. Firstly, the new rate was announced at 10:30, as opposed to the usual 13:30; secondly, the regulator timed the announcement with the end of the fiscal period, when the demand for rubles (the tax currency) is on the increase.

The Bank of Russia must have used these simple timing tricks to demonstrate it still controlled the forex rate. In the first few days, its ruse seemed to work, weakening the ruble. However, the trade surplus – the root cause – was not going anywhere, and before long, the Russian currency continued climbing to exorbitant values.

By late July, it has become apparent that the regulator is short of tools to handle the issue. The ruble is not responding to more drastic rate cuts, so exchange rate interventions sound like a more realistic option by the day – even though Nabiullina started her battle against the 2014 crisis by decisively forgoing them. The head of the Central Bank is opposed to this policy, explaining that an artificial course will not create the opportunity for the economy to adapt, but with the budget revenue plummeting, her opinion is losing weight. Caused by the fears of a planetwide recession, an acute drop in oil prices has weakened the ruble, but not for long, and has not increased the budget income, which remains the top priority (one could buy more rubles to pay taxes with dollars, but exporters still have fewer dollars).

In mid-July, Minister of Finance Anton Siluanov openly suggested restoring the system of predictable national currency rate dynamics, explaining the idea of such a regress by the problems of exporters, who cannot plan in the current circumstances. As he had pointed out previously, a ten-ruble drop in the dollar exchange rate costs the budget one trillion rubles.

So the loss of confidence in Nabuillina is almost a given, considering that her tools and approach to governance revolve around the market economy, which is rapidly degrading. Nabiulllina’s deputy Ksenia Yudaeva has named Presidential Adviser Sergey Glazyev as her potential replacement, according to Konstantin Sonin, professor of economics at the University of Chicago. As an economist who advocates a wide range of marginal economic theories, including planned economy, and as a close associate of Putin's, Glazyev has been rumored to be a contender for Nabiullina's post for a while.

Meanwhile, Nabiullina has no illusions about the future. A couple of years ago, she enriched the Russian newspeak with the term “negative growth” and offered the first civilized description of the disaster in the spring of 2022: “a structural transformation of the economy”. Further on, the Bank of Russia’s department of research and forecasting characterized this transformation as a technological regress, a prospective decrease in GDP growth, and its plateauing on a low level. Essentially, it means the country has no future.

In such a setting, banks make the best scapegoats. The patriotic public, who think about banks in Soviet terms, would only be too happy to witness the key figures’ downfall – and the plummeting life quality will make the sight even more satisfying. Setting national objectives for an industry without any regard for its interests requires public funding, so hoping for competition in this scenario would be naive. A more obvious method, especially for the advocates of a planned economy, is to split financial institutions by areas, set tasks for each area, and control everyone's performance.

Similarly, Putin, who used to say that restoring socialism in Russia was impossible, suddenly changed his tune. These days, he thinks that there is nothing wrong with the idea of socialism and that some countries successfully combine it with a market economy. “It works quite well. We should consider it,” he remarked. The newly appointed Vice PM Denis Manturov has also spilled the beans about giving up free market principles.

Anticipating such developments, Potanin’s banks (whose owner had already made it onto the UK’s sanctions lists after their purchase) began to encourage their clients to give up dollars and euros completely. One of Russia's main oligarchs could be weighing his options and preparing for the inevitable alignment of the industry with the Kremlin’s ideals.

“We have to admit that our efforts have turned out to be insufficient for our Western partners to fulfill their share of obligations within a timeframe that is reasonable and comfortable for our clients,” Tinkoff Bank announced, justifying the cessation of outgoing SWIFT payments. The bank whose reputation relied heavily on interaction with clients has adopted the language of the Russian Foreign Ministry and Putin himself, blaming “Western partners” for every pitfall. In the present situation, banks can only hope for the Kremlin’s understanding. The rest is far less important.