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- Connor Quincy via Fortune | FORTUNE
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Russia faces slow-motion bank run as war funding strains finances
ReRussia faces slow-motion bank run as war funding strains finances
Russian banks are losing deposits at a pace that could nearly double the 2022 outflow, as the Kremlin's war spending depletes state funds and raises fears of asset seizures.
Russian banks are experiencing a slow-motion bank run as depositors pull their money out amid fears the state may seize assets to fund its war effort, according to central bank data and interviews with former officials and business figures. In the first half of August alone, Russians withdrew $3.4 billion (286.4 billion rubles), following withdrawals of $7.3 billion in July and $4.5 billion in June.
The pace of outflows this year is on track to nearly double the $24.7 billion seen in 2022, when Vladimir Putin launched the full-scale invasion of Ukraine. Back then, Russia had ample cash reserves and expected a short conflict. More than four years later, the war has become a prolonged drain on the Kremlin's finances, with the budget sinking into deeper deficits, the sovereign wealth fund nearly depleted, and tax hikes straining consumers already dealing with high inflation.
“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,” a former finance official told the Washington Post, noting that banks have much of their capital tied up in loans elsewhere.
The liquidity crunch has become so severe that it threatens Russia's ability to fund its military. Taras Skvortsov, a senior executive at top retail lender Sberbank, told Russian radio that many banks do not have cash on hand to buy government bonds. The finance ministry halted bond auctions indefinitely last month amid higher borrowing costs and weak investor demand. Those auctions are the Kremlin's main source of domestic borrowing to fill a budget deficit that hit $76 billion at the end of July.
As government funding sources dry up, ordinary Russians fear their savings may be next. The leader of Russia's Communist Party told parliament that 130 trillion rubles held in bank accounts should be “mobilized” to address the country's economic woes. Meanwhile, the finance ministry is preparing legislation that could give it access to $40 billion in pension savings held in privately managed funds. This follows the nationalization of oligarch businesses, with $51.5 billion in assets seized for the state last year.
“If the government needs cash, Putin will just do a grab for assets. He doesn't care,” an associate of a Russian billionaire told the Post. “And that's where I think it's heading.”
Warnings about Russia's finances have been building for months. In June 2025, Russian banks raised red flags on a potential debt crisis as high interest rates weighed on borrowers' ability to repay loans. The head of the Russian Union of Industrialists and Entrepreneurs warned many companies were in “a pre-default situation.” A state-backed think tank, the Center for Macroeconomic Analysis and Short-Term Forecasting, said in December the country could face a banking crisis by October if loan troubles worsen and depositors pull out funds.
According to a European intelligence report from June, Russian lenders are vulnerable due to soaring indebtedness and deteriorating loans. The number of Russians who declared bankruptcy last year jumped by almost a third to more than 500,000. The report said the situation “creates the illusion of a dynamic economy that, in reality, conceals an explosive situation which an economic shock, such as an ambitious package of sanctions against banks … could trigger.”
The financial strain mirrors Russia's performance on the battlefield, where new Ukrainian tactics and drones have halted advances, damaged oil infrastructure, and pushed casualties above the replacement rate. Reports indicate the military is preparing plans for a wider mobilization, though the Kremlin may wait until after parliamentary elections next month to announce it due to expected political backlash. An earlier mobilization in September 2022 triggered a mass exodus of hundreds of thousands of men to neighboring countries, and rumors of a new one have already sent cross-border traffic soaring and property prices jumping in Georgia and Armenia.
