Russians are queuing at ATMs to withdraw cash as sanctions take their toll on the economy. Western sanctions have caused the Russian ruble to plummet, fueling a scramble for foreign currency. Payment card providers Mastercard and Visa have also blocked Russian banks from using their services.
The Russian currency plunged about 30% against the U.S. dollar after Western nations announced moves to block some Russian banks from the SWIFT international payment system and to restrict Russia's use of its massive foreign currency reserves.
The war in Ukraine and subsequent international sanctions have triggered a bank run in Russia. But this is no ordinary run—it may become a run on the central bank itself, one that holds important lessons for introducing central bank digital currencies.
Russian Money & ATMs
Rubles are Russia's national currency, and although you probably won't be able to exchange money to rubles in your home country before you leave, you shouldn't worry, as it is possible to withdraw dollars, euros, and rubles from your debit card in almost all of the local ATMs.
Russian Ruble Bank Run Example (Russia-Ukraine War, 2022)
Soon after, Russia's central government announced interest rate hikes and political uncertainty, and a bank run was underway. The Russia-Ukraine war and the subsequent international sanctions triggered the ongoing bank run in Russia.
Russia owes Western banks $120 billion.
Bank runs happen when a large number of people start making withdrawals from banks because they fear the institutions will run out of money. A bank run is typically the result of panic rather than true insolvency.
Consumers will still be able to use Mastercard and Visa-branded cards for domestic transactions in Russia, the country's state-backed payments network has said, reducing the impact of the US firms' decision to pull services over the invasion of Ukraine.
Foreign cash can be withdrawn in US dollars or euros, regardless of the currency of an account or deposit. The Bank of Russia has to preserve the said and other foreign cash restrictions due to the sanctions enacted against Russia that prohibit Russian financial institutions from purchasing western countries' cash.
How will banning Russia from Swift affect it? In March, seven Russian banks were removed from Swift including Bank Otkritie, Novikombank, Promsvyazbank, Bank Rossiya, Sovcombank, Vnesheconombank (VEB) and VTB Bank.
The fact is banks are typically the safest place to store your cash, even in a down market, so there's no need to withdraw it for security reasons.
Russia's ruble has lost about 40 percent of its value against the U.S. dollar this year as Western leaders have moved to isolate the country from the global economy with sanctions in response to its invasion of Ukraine.
The bulk of Russia's foreign reserves are held in the form of securities, deposits at other central banks and deposits at foreign commercial banks. A ban on transactions with Russia's central bank means that it can't sell those securities or access those deposits.
Russia defaulted on part of its foreign currency denominated debt on June 27, 2022 (because the money got stuck in Euroclear), its first such default since 1918 (in 1998 it was ruble-denominated bonds).
Following the 2022 Russian invasion of Ukraine, more than 300,000 Russian citizens and residents are estimated to have left Russia by mid-March 2022, at least 500,000 by the end of August 2022, and an additional 400,000 by early October, for a total of approximately 900,000.
Items to declare
You are entitled to import/export unlimited cash into Russia, but sums over $10000 should be declared at customs. This applies to all foreign currencies and to rubles, with the exact quantities varying slightly from currency to currency.
What you can bring into Russia: Money: Any currency and travelers cheques if the total value does not exceed 10000 USD. Otherwise, you will need to declare the amount, so when you leave the country you can prove that you are not taking money out of Russia.
Credit/debit cards issued in Russia are widely used in major Russian cities, including most hotels, restaurants, tourist attractions, supermarkets and other shops. ATMs are easy to find, predominantly in bank outlets.
The 2022 exit of Visa and MasterCard from the Russian market resulted in increased use of the Russian Mir payment system in the Russian Federation and beyond at a time when their combined penetration accounted for 70% of the Russian consumer credit card market.
But Russia's major banks have already downplayed the impact the move will have on consumers. Shoppers will still be able to use the cards for purchases within Russia until they reach their expiry dates. But Visa, Mastercard or American Express cards issued abroad will no longer work at shops or ATMs in Russia.
The Short Answer: Yes. The IRS probably already knows about many of your financial accounts, and the IRS can get information on how much is there. But, in reality, the IRS rarely digs deeper into your bank and financial accounts unless you're being audited or the IRS is collecting back taxes from you.
While the median bank account balance is $5,300, according to the latest SCF data, the average — or mean — balance is actually much higher, at $41,600.
However, if many depositors withdraw all at once, the bank itself (as opposed to individual investors) may run short of liquidity, and depositors will rush to withdraw their money, forcing the bank to liquidate many of its assets at a loss, and eventually to fail.