Fitch Ratings has flagged risks linked to the EU proposal to use the frozen funds for a “reparations loan” to Ukraine
Fitch Ratings has placed Euroclear Bank, the Belgium-based depository holding frozen Russian assets, on notice for a possible downgrade, citing legal and liquidity risks linked to the EU’s plan to use the funds to finance a “reparations loan” to Ukraine.
The move on Tuesday to place Euroclear on “Rating Watch Negative” means there is a higher chance its AA credit rating could be cut soon. Fitch said it may downgrade the bank if the European Commission’s plan goes ahead without strong legal and liquidity safeguards.
Euroclear was tasked with holding bonds for Russia’s central bank; they have matured into cash but cannot be returned because of EU sanctions. The money is currently parked in short-term deposits at the European Central Bank.
Under the EU plan, Euroclear would invest the funds in European Commission bonds to help finance a so-called “reparations loan” to Ukraine, to be repaid only if Kiev later receives reparations from Russia.
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