West to remove key Russian banks from global SWIFT system in new sanctions

Western allies have announced sweeping new sanctions against Moscow, including kicking key Russian banks off the main global payments system.

The US and its European partners also said on Saturday they would impose curbs on Russia's central bank to limit its ability to support the rouble and finance Moscow's attacks.

"...we are resolved to continue imposing costs on Russia that will further isolate Russia from the international financial system and our economies," the Western allies said.

"We will implement these measures within the coming days," according to a joint statement from the United States, France, Germany, Canada, Italy, Britain and the European Commission.

The allies said they committed to "ensuring that selected Russian banks are removed from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) messaging system".

They did not name the banks but an EU diplomat said some 70 percent of the Russian banking market would be affected.

The allies had initially shied away from such a move largely because of concern about the impact on their own economies.

READ MORE: What sanctions have been imposed on Russia and will they be effective?

'Financial nuclear weapon'

The fresh move deals a blow to Russia's trade and makes it harder for its companies to do business.

The French finance minister had earlier called a "financial nuclear weapon" because of the damage it would inflict on the Russian economy.

SWIFT is a secure messaging network that facilitates rapid cross-border payments, making it a crucial mechanism for international trade.

Sanctions on Russia's central bank could limit President Vladimir Putin's use of his more than $630 billion in international reserves, widely seen as insulating Russia from some economic harm.

The new measures will prevent Russia from "using its war chest", according to Ursula von der Leyen, president of the European Commission, the European Union's executive.

Clay Lowery, executive vice president for the Institute of International Finance, said the new sanctions "will most likely exacerbate ongoing bank runs and dollaristion, causing a sharp sell-off, and a drain on reserves".

But because Russia's large banks are integrated into the global financial system, new sanctions imposed on them could have a spillover effect, hurting trading partners in Europe and elsewhere.

Ukrainian Prime Minister Denys Shmygal said in a Twitter post early on Sunday: "Thanks to our friends ... for the commitment to remove several Russian banks from SWIFT".

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For all Ukraine updates from Sunday (February 27), click here