Fitch may downgrade Euroclear due to frozen Russian assets
Kyiv • UNN
Rating agency Fitch has placed Euroclear Bank's ratings on Rating Watch Negative due to EU plans to use frozen Russian assets for a 'reparations' loan to Ukraine. This could lead to increased legal and liquidity risks for Euroclear.
Fitch Ratings has placed Euroclear Bank's ratings on rating watch negative, citing a potential increase in legal and liquidity risks due to EU plans to use frozen Russian assets for a "reparations" loan to Ukraine. This is reported by Reuters, writes UNN.
Details
The EU plans to use up to 165 billion euros of Russian central bank assets frozen in Europe, without formally confiscating them, in search of a way to finance Ukraine's defense and budget needs in 2026-2027.
Euroclear, Belgium's central securities depository, held bonds for the Russian central bank at the time of Russia's full-scale invasion of Ukraine. These bonds have already matured, and the proceeds are "stuck" in Euroclear due to EU sanctions against the Kremlin.
Currently, this cash is placed in the European Central Bank on overnight deposits.
According to the EU plan, Euroclear is to invest these funds in zero-coupon bonds to be issued by the European Commission. The EU will then use this money to issue a so-called "reparations loan" to Ukraine.
Ukraine will only repay this loan when it receives reparations from Russia under a peace agreement, meaning it can effectively spend these funds now without waiting for Moscow to pay.
Fitch warned that an insufficient level of legal and liquidity protection under such a mechanism could lead to a maturity mismatch in Euroclear's balance sheet if obligations to the Russian central bank suddenly become payable.
The agency stated that it plans to decide on further rating actions when it has sufficient clarity on the political decision and the implementation of the "reparations loan," which may be agreed upon at the EU summit on Thursday-Friday.
Recall
Euroclear CEO Valerie Urbain believes that frozen Russian assets should be used for peace talks rather than to finance a reparations loan to Ukraine. This would avoid complex legal risks and maintain leverage.