According to a report by De Tijd on Wednesday, the Belgian National Bank has expressed worries about the billions of euros in blocked Russian assets held by Euroclear, a prominent Belgian

financial institution. The concern stems from the potential security threat and impact on financial stability that could arise from the use of these Russian assets to aid Ukraine.

Euroclear plays a vital role in the economic battle against Russia and has frozen the assets of all its Russian customers since the war began last year. Currently, there are approximately 300 billion euros worth of Russian assets that remain frozen within Euroclear.

Due to sanctions, the blocked Russian securities in Euroclear cannot generate dividends, coupon payments, or other cash flows that can be withdrawn. Instead, Euroclear can reinvest this money at higher interest rates, leading to increased income for the brokerage.

Representatives of European Member States and the European Commission have discussed the possibility of using these blocked assets as financial aid for Ukraine. However, Tim Hermans, the director at the National Bank, believes that such an agreement could pose a risk to financial security. He points out that Euroclear holds approximately 36,000 billion euros worth of securities, and not all of them come from European players. Some assets are linked to countries that are more sympathetic to the Russian cause. If the G7 countries or other nations decide to seize these Russian profits, it could potentially prompt those countries to withdraw their assets from Euroclear. The sheer magnitude of these amounts, ranging from two to three thousand billion euros, could impact the position of the euro.

In response to these concerns, Hermans emphasizes the need for legal guarantees before any actions are taken. He also highlights that Moscow has issued counter-sanctions, freezing Western assets held by Russian partners of the Brussels securities house. Lawsuits have enabled Russian parties to claim certain assets held by Euroclear's partners, creating a challenging accounting situation for Euroclear.

Euroclear is also required to maintain financial buffers around the blocked Russian assets. In the previous year, approximately 68 percent of Euroclear's net profit was derived from the returns earned by reinvesting these Russian assets.

The situation underscores the complexity and potential consequences associated with the handling of Russian assets at Euroclear, emphasizing the importance of ensuring financial stability and security in the process. Photo by Rokyann, Wikimedia commons.