Law360, London (March 2, 2022, 1:18 PM GMT) -- The European Union will shut seven major Russian banks out of the SWIFT messaging system that facilitates global financial transactions effective March 12, ramping up sanctions against Russia after its invasion of Ukraine, according to a decision announced on Wednesday.

The European Commission said the step will ban lenders including VTB Bank and Bank Rossiya from SWIFT in a move to restrict their ability to conduct banking operations worldwide. The EU's executive arm said the decision was coordinated with the U.S. and the U.K.

The lenders were chosen because they are already subject to sanctions by the EU and other G-7 countries, which include restrictions on foreign-held assets, the commission said. The other banks to be shut out are Bank Otkritie, Novikombank, Promsvyazbank, Sovcombank and Vnesheconombank.

"Today's decision to disconnect key Russian banks from the SWIFT network will send yet another very clear signal to Putin and the Kremlin," Ursula von der Leyen, President of the European Commission, said.

SWIFT, the Society for Worldwide Interbank Financial Telecommunication, is a Belgian-based financial messaging network that allows banks to make rapid cross-border payments for financial transactions and trade financing.

The commission said that the ban will come into force in 10 days to allow SWIFT a "brief transition period" to implement the measure and mitigate any damage to EU businesses and markets. The EU's executive arm said that it is prepared to add further banks at short notice, "depending on Russia's behavior."

SWIFT has been contacted for comment.

In additional steps announced on Wednesday, the EU said it has prohibited investing in projects co-financed by the Russian Direct Investment Fund, a sovereign wealth fund. The supply of euro-denominated banknotes to Russia also has been banned, the commission said. 

SWIFT is particularly important in Europe, which is by far Russia's largest trading partner, where it is the message provider for a number of systemically important payment systems. These include TARGET2 and securities settlement systems such as Euroclear and Clearstream, according to the European Central Bank.

Russia's biggest lender, Sberbank, was spared from the EU's SWIFT exclusion. But Sberbank Europe AG, the bank's European subsidiary, was shut down late on Tuesday after fearful account-holders started pulling their money out.

The SWIFT excisions mark the latest in a succession of financial and trade sanctions issued by the EU and the U.S. since Russia invaded its European neighbor last week.

The U.S., Britain, Canada and EU announced on Saturday that they would cut off selected Russian banks from SWIFT. The governments have hit Russia with other financial sanctions since the invasion, including freezing foreign bank assets and international holdings of the Russian central bank.

--Editing by Ed Harris.

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