Visa, MasterCard Cut Service to Two Russian Banks

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Following President Obama’s order on Thursday of sanctions against two dozen Russian citizens, credit card issuers Visa Inc. (NYSE: V) and MasterCard Inc. (NYSE: MA) have stopped providing services to two Russian Banks. One bank, Bank Rossiya, was on the Treasury Department’s sanction list, while the other bank, SMP, was added.

SMP is owned by billionaire brothers Arkady and Boris Rotenberg, who are reported to be childhood chums of Russian President Vladimir Putin.

Bank Rossiya is the country’s 15th largest bank, with $12 billion in assets, and is described by U.S. officials as the personal bank for senior Russian Federation officials. SMP, with assets of around $5 billion, is among Russia’s 40 largest banks.

The actions taken by Visa and MasterCard prevent bank customers from using their cards but do not prevent those customers from accessing their cash directly at the banks. SMP’s owners have objected to the card companies’ actions, according to Reuters:

Due to the fact that the sanctions were imposed on shareholders and not on the bank, we consider the moves by the payment systems unlawful and we are confident that we can resolve the encountered difficulties in the near future.

SMP also said it has no assets in the United States.

Fitch Ratings and S&P have both warned that Russia’s credit rating may be downgraded to reflect the potential impact on the country’s economy of the sanctions. Lower sovereign debt ratings mean that the Russian government would likely be forced to pay higher interest on its borrowing.

Russia’s MICEX index fell 2.1% Friday and is down more than 10% in the month of March.

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