The Washington Post reports:

Russians are pulling billions from the country’s banking system ― a record cash outflow amid intensifying Ukrainian drone attacks and rising fear that the Kremlin could start seizing deposits to finance its war.

Nearly $3.4 billion (286.4 billion rubles) was withdrawn in the first two weeks of August, on top of the $7.3 billion withdrawn in July and more than $4.5 billion in June, according to Russian Central Bank data.

Total withdrawals this year could nearly double the amount taken out in the first year of Russia’s full-scale invasion of Ukraine, according to Taras Skvortsov, a senior executive at Sberbank, Russia’s biggest retail financial institution.

The withdrawals are causing liquidity problems, according to Skvortsov and a former senior Russian finance official, overstretching a financial sector already strained by increasing levels of bad debts following a government-directed lending boom to ramp up military output.

“Drones are flying. Things are burning down. Nervousness is growing. And people’s everyday wisdom may be kicking in that they need to have cash under their pillow and not somewhere in banks where it may never be returned,” said the former finance official, who like others spoke on the condition of anonymity to discuss sensitive issues.

“For some banks this really is a problem,” the former official said. “They didn’t expect this, and they invested all the cash elsewhere, and yet people are coming and taking out half a trillion rubles a month.”

Alexandra Prokopenko, a former adviser to the Russian Central Bank, said the withdrawals reflected deepening fear among the Russian public.

“It means people have no trust in the Russian banking system or in the Russian financial system,” Prokopenko said. “This is all a consequence of the fear that the government will do something with the banking system, that it could nationalize deposits.” [Continue reading…]