In the first seven months of this year, citizens withdrew around 24.4 billion euros from the banking system, with a record 15.2 billion dollars withdrawn during the summer alone, according to central bank data.
Russians are massively withdrawing money from banks due to fears that the Kremlin could freeze or nationalize private deposits to finance the war in Ukraine. According to data from the Central Bank of Russia, citizens withdrew around 24.4 billion euros from the banking system in the first seven months of this year, with a record 15.2 billion dollars withdrawn during the summer alone.
As reported by the Washington Post, people fear that authorities could confiscate funds to finance the war. In the first two weeks of August, nearly 3.4 billion dollars (286.4 billion rubles) were withdrawn, over 4.5 billion dollars in June, and 7.3 billion dollars in July.
The total amount withdrawn this year already exceeds the 24.7 billion dollars (2 trillion rubles) withdrawn during the first year after the invasion in February 2022. In the first two weeks of the invasion, 23 billion dollars left the system, and banks faced a cash shortage.
Taras Skvortsov, a senior official at Sberbank, Russia's largest retail bank, stated that the total amount of funds withdrawn this year could nearly double compared to the amount withdrawn during the first year of Russia's full-scale invasion of Ukraine.
Data from the financial market platform Banks.ru shows that demand for cash began to rise in early March and has continued, with around 300 billion rubles (3.05 billion euros) leaving accounts each month. Five of Russia's seven largest banks recorded net outflows of household deposits.
The hardest hit was Gazprombank, which lost 299.5 billion rubles (3.04 billion euros) in four months, or 10.8 percent of its total deposits. Rosselkhozbank lost 270.5 billion rubles (2.75 billion euros), a decline of more than 15 percent. Alfa-Bank, Russia's largest private bank, lost 179.4 billion rubles (1.82 billion euros), or 5.6 percent of deposits. Sovcombank and VTB recorded additional outflows of 81.7 billion rubles (830 million euros) and 20.4 billion rubles (207 million euros), respectively.
Sberbank was initially stable, but its savers also turned to cash: in June, 211.6 billion rubles (2.15 billion euros) left, and in July an additional 31.8 billion rubles (323 million euros). T-Bank was the exception, with an increase in deposits of 193 billion rubles (1.96 billion euros).
The withdrawals are causing major liquidity problems, according to Skvortsov and a former senior Russian Finance Ministry official, further straining a financial sector already under pressure from a growing number of non-performing loans following a credit boom fueled by government decrees to boost military production.
“Drones are flying. Things are burning. Nervousness is growing. And maybe that everyday human logic kicks in that you should keep your money as cash under the mattress, not in banks where it might never be returned,” said the former Finance Ministry official, speaking on condition of anonymity. “For some banks, this is a real problem. They didn't expect it; they invested all the money elsewhere, and now people are coming and withdrawing half a trillion rubles a month,” he added.
The total amount of cash in circulation rose by 643.4 billion rubles (6.53 billion euros) in July alone, the largest monthly increase since the beginning of the year, according to data from the Bank of Russia. In the first half of August, an additional 300 billion rubles were withdrawn.
The withdrawals are driven by two overlapping fears: that Ukrainian drone attacks on refineries and logistics infrastructure could destabilize the financial system, and that the Russian government could seize or freeze deposits to cover rising war costs.
Alexandra Prokopenko, a former adviser to the Russian Central Bank, says the withdrawals reflect a deepening fear among the Russian population. “This means people have no confidence in either the Russian banking system or the Russian financial system... It's all a consequence of the fear that the government will do something with the banking system, that it could nationalize deposits,” Prokopenko emphasizes. “I wouldn't rule out the possibility that authorities impose restrictions on cash withdrawals,” she added, although she considers such nationalization unlikely.
The other fear is based on recent events. Russian prosecutors transferred approximately 51.5 billion dollars (44.3 billion euros) of private assets under state control last year, according to the Washington Post. In June, authorities seized around 7.6 billion dollars (6.5 billion euros) in assets linked to billionaire Vadim Moshkovich, founder of the agricultural holding Rusagro.
At the same time, Vladimir Putin is extracting what officials describe as voluntary “donations” from oligarchs, with hundreds of billions of rubles flowing into the federal budget by mid-August, according to the Russian business daily Vedomosti. Large companies are also moving money beyond the reach of domestic regulators, with more than 9.4 billion dollars leaving the Russian banking system in the second quarter of this year alone, according to central bank data.
Russians also massively withdrew money from banks in 2022 after the invasion and the first wave of Western sanctions. The central bank then temporarily raised interest rates to 20 percent and introduced capital controls to stabilize the system. Those controls were later lifted and the rush subsided, but the current trend is larger and longer-lasting.
Russia's broader economic position is deteriorating. GDP grew only 0.3 percent in the first half of this year, compared with 1.2 percent in the same period last year, according to Kremlin data that cannot be independently verified.
Andrei Klepach, chief economist at the state development corporation VEB, was dismissed over the weekend after publicly questioning whether Russia can win a protracted war. “We will not win this war of attrition. We are under the illusion that everything will collapse. It hasn't, and it won't. Our costs are rising,” he said at the Moscow Exchange economic forum in May.
