Immobilised Russian Assets: The Way to Support Ukraine

 

The recent decision by the EU Council to adopt a regulation clarifying the obligations of Central Securities Depositories (CSDs) holding assets and reserves of the Central Bank of Russia (CBR) marks a significant step in responding to Russia's illegal invasion of Ukraine in 2022. This decision comes as part of the EU's ongoing efforts, in coordination with international partners, to impose restrictive measures on Russia and support Ukraine in its time of need.

Since the imposition of prohibitions on transactions related to the management of CBR assets and reserves, financial institutions in EU member states have found themselves holding immobilized Russian assets. Today's decision by the Council clarifies the legal status of these assets and sets out clear rules for their management.

In particular, CSDs holding more than €1 million of CBR assets are required to account for extraordinary cash balances accumulating due to EU restrictive measures separately and keep corresponding revenues separate. Moreover, these entities are prohibited from disposing of the resulting net profits. This decision acknowledges the risks and costs associated with holding these assets and reserves and allows CSDs to request authorization from their supervisory authorities to release a portion of these net profits to comply with statutory capital and risk management requirements.

Importantly, this decision also opens the door for the Council to consider establishing a financial contribution to the EU budget raised from these net profits. This contribution would be aimed at supporting Ukraine's recovery and reconstruction efforts at a later stage. The funds could be channeled through the EU budget to the Ukraine Facility, for which a provisional agreement was reached by the Council and the European Parliament on 6 February.

By leveraging the revenues generated from immobilized Russian assets, the EU demonstrates its commitment to standing with Ukraine and providing tangible support for its recovery in the aftermath of the conflict. This decision underscores the EU's solidarity with Ukraine and its determination to hold Russia accountable for its actions while also offering practical assistance to those affected by the crisis.