Cash is piling up at Euroclear Bank as a result of sanctions imposed on Russia by various governments, including the United States, the European Union, and Japan. These sanctions have immobilized the Bank of Russia's reserve assets, meaning that the assets remain under the bank's ownership but cannot be moved. Euroclear, the Brussels-based international central securities depository, is holding the majority of these immobilized assets.
The balance sheet of Euroclear Bank has grown more than fivefold since early 2022, indicating the significant accumulation of cash. While the exact amount of the Bank of Russia's holdings at Euroclear is not disclosed, it is estimated to be around €265 billion. This cash deposit is non-remunerated, meaning it does not earn any interest for the Bank of Russia.
Due to the non-interest-bearing nature of the cash deposit, there is a strong argument that the interest income generated from it belongs to Euroclear rather than the Bank of Russia. This income, which is in the high single-digit billions of euros annually, could potentially be appropriated by the European Union for the benefit of Ukraine.
The European Union plans to provide €50 billion of financial assistance to Ukraine between 2024 and 2027. While the income from the immobilized assets would not cover the full aid package, it would still provide valuable support.
This situation raises questions about the international rule of law and the allocation of funds generated from immobilized assets. The European Union's potential appropriation of the interest income aligns with its commitment to the rule of law and could provide additional resources for Ukraine's assistance.
As the situation develops on the Ukrainian frontlines and in the US Congress, the European Union may need to further increase its financial assistance to Ukraine. The income from the immobilized assets at Euroclear could play a role in supporting these efforts.
In conclusion, the sanctions on Russia have led to a significant accumulation of cash at Euroclear Bank. The European Union has the opportunity to appropriate the interest income from these immobilized assets for the benefit of Ukraine, aligning with its commitment to the international rule of law. While this income may not cover the full aid package, it would still provide valuable support in the ongoing crisis.
To find out more, go to this link: https://www.piie.com/research/piie-charts/2024/cash-keeps-accumulating-euroclear-bank-result-sanctions-russia
