NEW YORK (Reuters] – Banning certain Russian banks of the SWIFT international money system might force central banks into boosting liquidity in order to make up for any missed payments. Credit Suisse On Sunday, (SIX) strategist stated.

The West announced on Saturday that it would impose severe sanctions against Russia in response to its invasion of Ukraine. This includes blocking banks of the SWIFT international payment system.

This weekend, major banks worked to understand the implications of the new sanctions. Markets were also preparing for volatility because the measures may disrupt international trade and harm Western interests.

Credit Suisse’s Zoltan Possar stated in a note that “Exclusions to SWIFT would lead to missed payments, giant overdrafts and similar to what we saw in March 2020”,

In March 2020, the U.S. Federal Reserve joined forces with major central banks in an effort to alleviate a global currency-funding crunch. This was part of emergency measures taken to mitigate the economic and financial fallout from coronavirus pandemic.

Pozsar said that “The virus stopped the flow of goods, services and led to missing payments. War has also led to exclusions form SWIFT which will again result in missed payments.”

One would expect that central banks would activate daily swap lines operations again now that SWIFT has been invoked. He said that central banks must be ready to market on Monday once again”

The Fed announced its intention to counter inflation this year. Its balance sheet nearly doubled during the pandemic, to $9 trillion. This was after buying bonds to lower longer-term interest rates.

Pozsar indicated that however, the Fed’s balance could shrink again through quantitative tightening. It is an inverse of its bond-buying program.

He stated that the consequence of banks being excluded from SWIFT was real and central banks must reactivate U.S. dollars funds supplying operations daily.