Financial sector news

The Belgian depository Euroclear, which holds most of Russia's frozen assets in Europe, has warned the EU about the risks of the reparations credit mechanism, according to the Financial Times.

Euroclear CEO Valérie Urbain, in a letter to European Commission President Ursula von der Leyen and European Council President António Costa, noted that providing assistance to Ukraine using Russian assets outside the European Union could be seen as “confiscation.”
In her opinion, this could alarm investors in European government debt, in particular sovereign wealth funds and central banks, which may perceive such a decision as undermining the rule of law.

Urben also stressed that the obligation to invest Russian funds in special interest-free debt instruments is almost guaranteed to provoke countermeasures from Russia and is likely to result in lawsuits, from which Euroclear must receive adequate protection.
The head of Euroclear expects that the “reparation credit” model will include unconditional guarantees to cover the depository's risks “as long as legal liability exists.” This refers, in particular, to possible retaliation by Russia or other states, liquidity risks, and “all other risks associated with the acquisition of this financial instrument.”

Reference:

Following Russia's full-scale invasion of Ukraine, the European Union froze approximately €210 billion in Russian state assets, of which approximately €185 billion are held in Euroclear. The resumption of peace talks on Ukraine has reignited the debate on agreeing the terms of a €140 billion loan for Kyiv using frozen Russian sovereign assets.