The EU, US and their allies have agreed to cut off a number of Russian banks from the main international payment system, Swift.
The assets of Russia’s central bank will also be frozen, limiting Russia’s ability to access its overseas reserves.
The intention is to “further isolate Russia from the international financial system”, a joint statement said.
Russia is heavily reliant on the Swift system for its key oil and gas exports.
The joint sanctions are the harshest measures imposed to date on Russia over its invasion of Ukraine.
Swift, or the “Society for Worldwide Interbank Financial Telecommunication”, is a secure messaging system that makes fast, cross-border payments possible, enabling international trade.
Based in Belgium, it facilitates transactions between more than 11,000 banks and financial institutions across the globe.
It plays a pivotal role in supporting the global economy, but has no authority to make sanction decisions itself.
The banks affected were not immediately named, but the German spokesman said they would include “all those already sanctioned by the international community, as well as other institutions, if necessary”.
Removal from Swift is deemed to be a severe curb because almost all banks use the system.
The measures were agreed by the US, UK, Europe and Canada.
Ursula von der Leyen, president of the European Commission, said the decision to paralyse the assets of Russia’s central bank would stop the Kremlin from “using its war chest”.
The EU and its partners agreed to freeze the bank’s transactions and prevent it from liquidating its assets.
Responding to the announcement, Ukraine’s Prime Minister Denys Shmyhal tweeted his appreciation for the sanctions, calling them a “real help during this dark time”.
EU foreign ministers are set to meet on Sunday to co-ordinate member states’ military aid to Ukraine, and discuss humanitarian assistance for the country and those fleeing the conflict.