Japan megabanks suspend dollar transactions with Sberbank

The logo of Russia’s largest lender Sberbank in one of its offices in Moscow.

Japan’s three major banking groups have decided to suspend all dollar transactions with Russia’s largest bank, Sberbank, from Saturday, officials from each of the three groups said.

The megabanks — Mitsubishi UFJ Financial Group, Inc., Sumitomo Mitsui Financial Group, Inc. and Mizuho Financial Group, Inc. — are aligning their actions with the U.S. government, which has imposed sanctions on Sberbank.

Since they have been paying in dollars for trade with Russia, such as for energy, the megabanks will need to seek alternative means for remittances.

The U.S. government said it would suspend interbank payments, remittances and other transactions between U.S. banks and Sberbank as well as its 25 subsidiaries on Saturday. The three megabanks also decided to take similar measures for transactions involving Japan. Mitsubishi UFJ will suspend not only transactions in dollars but all foreign currency transactions other than yen.

The megabank trio has blocked transactions in all currencies with financial institutions such as VTB Bank, Russia’s second-largest bank, and Bank Russia. These banks have been removed from the international settlement network, but Sberbank has been exempt from the sanctions, which made it one of the few routes to send money to Russia.

Sberbank is used by Japanese companies in Russia and their employees. Most energy transactions, which have not been subject to the sanctions, are conducted in dollars.

If remittances become impossible, the negative impact on Japanese companies doing business with Russia will be widespread. In that case, European banks that have bases in Russia could be used as an alternative means.