FINANCIAL SANCTIONS AND BANKING-SECTOR RESILIENCE: CROSS-BORDER PAYMENTS, LIQUIDITY RISKS, AND POLICY ADAPTATION

Financial sanctions operate through the infrastructure that allows banks, firms, and households to move value across borders. An asset freeze can prevent a designated person from using funds; restrictions on a bank can limit its access to foreign counterparties; and the loss of a correspondent relationship can make an otherwise lawful payment slower, more expensive, or impossible. These effects are not confined to the entity named in a sanctions measure. Because international banking depends on interconnected institutions, a restriction at one node can alter payment routes, compliance decisions, and liquidity needs elsewhere in the network.