Steps by the United States and its allies to target some Russian banks for the country’s invasion of Ukraine jarred Russia’s financial system on Monday, with its currency falling by more than 30 percent against the dollar.
The fall of the ruble is likely to worsen inflation in Russia, and it has heightened fears of bank runs in the country. Russia’s central bank said over the weekend that it would support Russian financial institutions that had been hit with sanctions and that banks would continue to be able to carry out transactions in rubles and foreign currency.
On Monday, the central bank took further steps, raising its key interest rate to 20 percent from 9.5 percent to try to control the damage from the sanctions. The bank also said it would release about $7 billion worth of bank reserves that had been set aside as a buffer for unsecured consumer and mortgage loans.
In another effort to prop up the ruble, Russia’s finance ministry also said Monday that it would require companies to sell 80 percent of their foreign currency holdings.
Last week, the United States, Europe and other allies took steps to exclude some Russian banks from international transactions by removing them from the SWIFT financial messaging system. At the same time, the United States and several allies announced they would move to prevent Russia’s central bank from deploying its reserves to undermine the sanctions.
The drop early Monday put the ruble at record levels, trading as low as 120 per dollar, although the currency had recovered somewhat by afternoon trading in Asia.
A crash of the currency would add to the pain that average Russians may feel from the sanctions. Inflation would be pushed even higher, and the prices of imported goods would surge.
Russia’s central bank tried to project calm over the weekend, saying that the banking system was stable and that it would continue to provide banks with cash to ensure normal operations. It said that services would be normal and that all bank cards would work.