Credit risk is one of major risks stemming from the war that banks face. It increases when a debtor's ability to pay is affected by war. An example is the disruption in the commodities and fertilizer supply chains. The resulting shortage may incapacitate manufacturing and restrict the production capacity of debtors in the food and agriculture sectors.

Another example is the sanction on exports to Russia. It hurts debtors that derive major revenue from the Russian market. Soaring freight and insurance costs may also cut into debtors’ margins and potentially diminish their capacity to service their debts.

The second is operational risk. This may increase as a result of disruption in banking services due to regulatory changes in the countries where banks operate. Banks’ capacity to serve customers can also be disrupted by the actions of international institutions that support banks through certain banking services. Three examples of such institutions are the Society for Worldwide Interbank Financial Telecommunications (SWIFT), Visa and Master Card.

Connecting more than 11,000 institutions in 200 countries, SWIFT provides communication services that enable payment transactions between financial institutions.

SWIFT decided to disconnect seven designated Russian entities and their Russia-based subsidiaries from the network on March, 12, 2022. Furthermore, SWIFT disconnected three designated Belarusian entities and their Belarus-based subsidiaries on March 20, 2022.

Thus, financial and banking institutions in the world can no longer use SWIFT to conduct transactions with these Russian and Belarusian entities. The termination has practically put a stop to banks’ capability in serving customers making remittances to Russia.