Why have Chinese banks in Russia stopped dollar and euro settlements?

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Chinese Banks Cease Dollar and Euro Settlements for Russia Trade Amidst New US Sanctions

Russian affiliates of Chinese banks have suspended the processing of dollar and euro settlements for Russia-China trade. This decision follows new United States sanctions that compelled Russia's primary exchange to halt trading in these currencies. The move has created a ripple effect, leading to price discrepancies and wider spreads as trading shifts to over-the-counter markets, thereby complicating access to dependable pricing for the Russian ruble.
Halt in Ruble Trading on Moscow Exchange

The immediate catalyst for the cessation of dollar and euro settlements by Chinese banks appears to be the new US sanctions. These measures directly impacted the Moscow Exchange, forcing it to suspend trading in US dollars and euros. Consequently, the infrastructure for conducting such transactions has been significantly disrupted.
Shift to Over-the-Counter Markets

With official exchange trading halted, the financial landscape for currency transactions in Russia has transformed. Trading has predominantly moved to over-the-counter (OTC) markets. This shift complicates the ability of institutions, including Chinese banks, to conduct standard settlement processes and obtain transparent pricing for the Russian currency.
Impact on Trade Settlements

The suspension of dollar and euro settlements has direct implications for the ongoing trade between Russia and China. While the specific details of the sanctions' broader impact on financial institutions are not elaborated, the halt in key currency trading makes it challenging for banks to facilitate payments and manage currency risks associated with bilateral trade. This situation necessitates a re-evaluation of payment mechanisms for these transactions.

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Why have Chinese banks in Russia stopped dollar and euro settlements?

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