“If foreign investors see that assets here can suddenly be seized, a financial Pandora’s box threatens to open.” Valérie Urbain, who takes over as head of financial services provider Euroclear this week, calls on the G7 countries to be cautious about the Russian assets frozen at the company. The countries want to confiscate those frozen assets and use them to provide support to Ukraine. Not a good plan, says Urbain.
Euroclear is described as the ‘bookkeeper of the stock exchange’. The company, headquartered in Brussels, has the main task of processing financial transactions in bonds, shares or investment funds. In addition, it also works as a bank for major investors and central banks: no less than 39,000 billion euros is today parked at Euroclear. That money comes from all over the world, including Russia.
Funds parked
These Russian assets, totaling around 200 billion euros, were blocked by the West after the Russian invasion of Ukraine. The fact that the assets are parked ensures that Euroclear can also make a profit on them; in 2023 only 1.1 billion euros. The taxes on that profit are skimmed off by Belgium and used to finance aid to Ukraine.
“There is now talk about how much of our Russian profits can be used for the fund that Europe provides for support to Ukraine,” says new CEO Valérie Urbain in ‘De Tijd’. “It would be 87 to 89 percent of those profits, after deduction of taxes and other costs. We want to set aside the rest of that money as a buffer to cover later legal costs.”
But now there is a chance that Belgium has completely lost its golden mule: the G7, the group of seven economic superpowers, wants to confiscate Russian assets themselves to use as support for Ukraine. “We have a much more fundamental problem with that. Such an intervention could have major consequences not only for Euroclear. It leads to legal uncertainty for the entire European capital market. If foreign investors see that assets here can suddenly be seized, a financial Pandora’s box threatens to open.”
Russian attacks
“We already see that many central banks from other countries are following this file very closely,” Urbain continues. “If the Russian assets held here were confiscated, they too risk losing confidence in the EU. The dollar is essential as an international trading currency, but the euro is much less so. Large foreign players could then invest much less in Europe than now.”
This move by the G7 could also have major consequences for its own company. One hundred lawsuits against Euroclear are already underway in Russia, Urbain says. The legal costs and fines are for Euroclear. “Precisely because we have to take many unknown factors into account, we will set aside the profits we make on Russian assets as a buffer.” At the same time, the CEO also fears attacks from Russia: “We are stuck. But so far we have not had any cyber attacks. We have also invested heavily in security in recent years.”
The negotiations about what to do with Russia’s assets are being conducted at a political level; Euroclear has no say in this, Urbain emphasizes. “The further away we are from the discussion about this, the better. Euroclear does not play an active role in those discussions. But as an institution that is critical to the financial system, we do share our experiences. We try to make the impact of some decisions clear.”
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