What happens to a country if it is disconnected from the SWIFT system?
Banking
Asked by Question Bot03/Oct/20161 answer
1 Answer
F
Faisal Khan
Answered 03/Oct/2016
Needless to say the ability to use the SWIFT platform for any form of international wire-transfers is no longer an option.
The banking impact is that wiring money in to and out of the country which has no SWIFT becomes inherently very difficult. It is not impossible, just extremely difficult.
If a country X has say 50 banks and the country has been cut off from the SWIFT system (for some reason), the 50 banks and the central bank now may no longer have an option to service SWIFT wire transfers directly. However, think about another country Z which has good trade & banking relations with country X, might act as a proxy for all SWIFT transfers.
What country X & country Z would need to do is agree on how to settle funds, etc. (which is not a big deal).
However, political and/or other sanctions can result can be placed in such a way, that proxy payments into country X are not allowed.
The alternate is for country X is to establish correspondent relationships with other regional countries and their banks to do a one-on-one trade and entirely give up on international wire transfers via SWIFT.
Good ol' telegraphic transfers do still work and are implemented in banks. SWIFT just happens to be a very efficient method of exchanging money.
The banking impact is that wiring money in to and out of the country which has no SWIFT becomes inherently very difficult. It is not impossible, just extremely difficult.
If a country X has say 50 banks and the country has been cut off from the SWIFT system (for some reason), the 50 banks and the central bank now may no longer have an option to service SWIFT wire transfers directly. However, think about another country Z which has good trade & banking relations with country X, might act as a proxy for all SWIFT transfers.
What country X & country Z would need to do is agree on how to settle funds, etc. (which is not a big deal).
However, political and/or other sanctions can result can be placed in such a way, that proxy payments into country X are not allowed.
The alternate is for country X is to establish correspondent relationships with other regional countries and their banks to do a one-on-one trade and entirely give up on international wire transfers via SWIFT.
Good ol' telegraphic transfers do still work and are implemented in banks. SWIFT just happens to be a very efficient method of exchanging money.