Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Welcome back, everyone. Just a quick video today to talk through the recently announced sanctions on Russia's central bank and the likely economic effects of Russia's invasion of Ukraine.

Obviously there are much greater concerns than these economic issues. The ongoing situation

is being described in the press as the worst crisis in Europe since the Second World War.

And so the human impact of this invasion is both horrific and

immeasurable. And my heart goes out to the people of Ukraine who are in a truly awful situation.

Now, obviously, this is a very fast-moving situation. So I'm rushing to get this video up quickly.

I don't usually upload on weekends, but the most recent news is that the United States,

Canada and European allies have all agreed earlier today to remove certain Russian financial

institutions from SWIFT, but more importantly to impose major restrictions on Russia's

central bank. Now there's been a lot of discussion around blocking Russia from SWIFT and

I made a video on the topic two days ago, but this move to target Russia's central bank

is much more of a big deal and it comes with very little precedent. Russia's central bank is much more of a big deal and it comes with very little precedent.

Russia's central bank has more than $640 billion in foreign exchange reserves, much of which

is held at various Western central banks.

23% of their reserves are held in gold and that's stored at the Russian Central Bank.

14% is in China, which is probably safe from sanctions, and the rest it would appear is held at various central banks around the world.

Now this means that around $400 billion of Russia's central bank reserves have just been frozen,

leaving them with around $240 billion in available reserves and a war that's possibly costing them $20 billion per day.

Freezing or quarantining the country's reserves like this will put

huge pressure on the Russian financial system and it could trigger bank runs, tank the

ruble and cause panic amongst Russian businesses. The United States had already sanctioned

...