The idea of using immobilised assets of the Central Bank of Russia (CBR) to finance a ‘reparation loan’ for Ukraine was discussed at the European Council meeting on 23 October 2025. Supported by many economists (Dixon et al. 2024, Sandbu 2025), a ‘reparation loan’ would be repaid only if Russia ultimately pays war reparations. The decision was blocked by Belgium, home to Euroclear, the largest European Central Securities Depository (CSD), on whose balance sheet Russian assets are immobilised and frozen. The question should appear on the agenda of the next European Council Meeting on 18-19 December 2025.
How can it be that a private financial institution effectively blocks a collective European decision, one with major geopolitical implications? In a new policy note, I explain how European CSDs operate, before outlining the key actions taken by European policymakers regarding Russian assets (Havrylchyk 2025).
Central Securities Depositories are a core component of post-trade infrastructure. Each security issuer must select a CSD to register newly issued securities, and when these securities are traded, the CSD records the change in ownership – a process known as settlement. Beyond settlement, CSDs facilitate the distribution of cash flows such as dividends, coupons, and bond redemptions. These functions are essential to the integrity of securities issuance, the accurate recording of ownership, and the finality of settlement, making it inconceivable that European authorities would ever allow Euroclear or any other CSD to fail.
Omnibus accounts might facilitate sanctions evasion
CSDs connect issuers and investors, but modern account-holding models can also obscure these connections. Theoretically, two models of account holding exist. In a direct holding system, a CSD opens segregated accounts in the name of individual investors. By contrast, in an indirect holding system, a CSD opens omnibus accounts in the name of a custodian, which then allocates the securities among its clients in its internal books. The largest EU economies, such as France and Germany, predominantly rely on the omnibus account model. In contrast, many smaller countries, including Sweden, Finland, and Norway promote full segregation.
Omnibus accounts and long custody chains reduce transparency, which might facilitate tax and sanctions evasion. For example, the omnibus structure of accounts was blamed when Clearstream Banking S.A. (Luxembourg) violated US sanctions on Iran (OFAC 2014). Researchers that work on tax evasion have long called for segregated individual accounts to ensure transparency of beneficial owners (Neef et al. 2022, Zucman 2015).
Euroclear’s market power in the fragmented EU market
Due to strong network effects and economies of scale, most countries have either one or two CSDs. In the US, the Depository Trust Company (DTC) registers and settles all private securities and, given its monopolistic position, it operates as a cooperative.
In the EU, there are 33 CSDs, but the market is dominated by three profit-seeking holdings (Euroclear, Clearstream, and Euronext Securities), which have consolidated securities’ services across trading, clearing, and settlement (Table 1). Euroclear Holding, the largest European CSD, oversees the custody of €42.5 trillion of assets, representing roughly 50% of the European CSD market. It includes Euroclear Bank, which settles Eurobonds, as well as national entities that settle Belgian, Dutch, Finnish, French, Irish, Swedish, and UK securities.
Table 1 Vertical and horizontal integration of securities trading, clearing, and settlement in Europe (selected major players)
Note: This table includes only the largest players in each market. Vertically integrated financial market infrastructures are shown in the same colour. CCP refers to Central Counterparty. T2S refers to TARGET2-Securities, which allows horizontal technical integration of CSDs via a platform operated by EUROSYSTEM. * Switzerland is connected to T2S only for euro-denominated securities.
Source: Author’s illustration.
Despite high market concentration, the EU market is fragmented, because legal holdings have not integrated technical systems of national CSDs. The only exception is the single technical system in Belgium, France, and the Netherlands, managed by Euroclear. Technical fragmentation is widely regarded as a major obstacle to the creation of the European Savings and Investment Union because it slows down cross-border settlement (Arampatzi et al. 2025). In his European competitiveness report, Mario Draghi (2024) called for the creation of a single European CSD.
Euroclear and custody of foreign reserves
International CSDs, such as Euroclear and Clearstream, are focal points in global financial networks. States with political authority over these infrastructures can weaponise them as chokepoints to cut their adversaries off from the network (Farrell and Newman 2019).
On 26 February 2022, following the full-scale Russian invasion of Ukraine, the leaders of the US, the UK, the EU, Canada, France, Germany, and Italy announced their decision to immobilise the reserves of the Central Bank of Russia. A series of Council Regulations have also imposed asset freezes targeting senior Russian officials, oligarchs, and propagandists. Note that the term “immobilisation” refers to sovereign assets, whereas freezing pertains to other assets.
The immobilisation of the CBR’s assets was possible because the CBR maintained a direct account with Euroclear Bank. Overall, 103 central banks rely on Euroclear for the custody of their foreign reserves, while 70 central banks rely on Clearstream, making both CSDs significant chokepoints.
Euroclear Bank is the only financial institution that discloses the precise amount of Russian assets, as maturing securities appear on its balance sheet. As of June 2025, it reported €194 billion in immobilised and frozen assets, equivalent to 85% of its total balance sheet (Table 2).
Table 2 Impact of Russian sanctions on Euroclear Holding’s accounts
Source: Annual accounts of Euroclear Holding.
The total amount of immobilised and frozen assets has not been disclosed. The widely circulated figure of about $300 billion refers to the CBR reserves held in G7 currencies, as reported in December 2021 by the CBR. Novokmet et al. (2018) estimate that the offshore wealth of Russian oligarchs amounted to roughly three times the size of the official foreign reserves of the CBR. It’s unclear what proportion of the latter assets has been sanctioned and is effectively frozen. Cocozza et al. (2023) use the BIS locational banking statistics to trace Russian assets in Belgium and the US.
The use of Euroclear’s extraordinary revenues to support Ukraine
Euroclear reinvests Russian assets, generating additional interest income. In 2023, 77% of Euroclear’s after-tax profits were attributed to the impact of Russian sanctions (Table 2). Starting in 2024, this share fell due to the EU windfall contribution of 99.7% on the extraordinary revenues generated by CSDs holding CBR assets. The tax base corresponds to the net interest income from CBR’s assets after deducting administrative expenses and Belgian corporate taxes.
In June 2024, the G7 Leaders went a step further, announcing a $50 billion loan to Ukraine, to be repaid through future extraordinary revenues generated from the immobilisation of CBR’s assets. With EU loans carrying maturities of up to 45 years, the initiative signals that Russia’s assets are expected to remain immobilised for decades.
Loss recovery derogation to compensate Euroclear’s clients
According to the Financial Times (2025), Russia has confiscated approximately €33 billion in assets belonging to Euroclear clients. In addition, Euroclear faces more than 100 lawsuits related to immobilised and frozen assets. In response, the EU Council introduced a loss recovery derogation and a no liability clause in December 2024. A loss recovery derogation enables CSDs to request competent authorities of the Member States to unfreeze cash balances and use them to meet their legal obligations towards their clients.
Reuters (2025) reports that Euroclear invoked this regulation to release €3 billion in Russian assets to compensate clients whose holdings had been expropriated in Russia. Euroclear’s quarterly results also show a €1 billion decline in Russian assets between the second and fourth quarters of 2025, consistent with a partial unblocking of these funds. This decision set an important precedent for the confiscation of Russian assets. However, the proceeds were used to indemnify Euroclear’s clients, effectively socialising their losses from operating in Russia.
Seizing Russian assets
Politically, there is growing support for asset confiscation, as it becomes increasingly difficult to justify shifting the financial burden of Ukraine’s defence and reconstruction onto Western taxpayers while substantial Russian assets remain immobilised or frozen. The US Congress enacted legislation authorising confiscation in 2024, while the European Parliament adopted a similar, though non-binding, resolution in March 2025.
The ECB has warned that such measures could undermine the stability of the international financial system, as countries such as China and the Gulf states might reduce their reliance on the euro. Yet despite these risks, neither the immobilisation of the CBR’s assets in February 2022, nor the recent loan scheme backed by future interest income, nor the partial seizure of Russian assets to compensate Western clients has so far led to an increase in EU sovereign bond yields.
An increasing number of proposals call for de facto, rather than de jure, confiscation (Becker and Gorodnichenko 2024, Dixon et al. 2024, Sandbu 2025). While similar in spirit, these proposals envisage different mechanisms. For example, Sandbu (2025) suggests that the ECB establish a ‘bad bank’ to which Euroclear and other financial institutions would transfer their liabilities and assets affected by sanctions. Creating such a vehicle would mitigate geopolitical risks for Euroclear. The newly created bad bank could then reinvest its assets in ‘reparation loans’ issued by Ukraine in anticipation of future reparations payments by Russia.
To conclude, if confiscation of Russian assets carries a financial risk, this risk concerns all EU Member States. Euroclear’s opposition fits within a well-documented pattern of financial institutions favouring policies of appeasement to avoid instability (Kirshner 2007). In normal times, such strong aversion to financial and monetary instability is desirable. However, Kirshner (2007) shows that financial caution can at times conflict with national interests, and Euroclear’s stance today appears to do just that for Europe.
References
Arampatzi, A-S, R Christie, J Evrard, L Parisi, C Rouveyrol and F van Overbeek (2025), “Capital Markets Union: A Deep Dive – Five Measures to Foster a Single Market for Capital”, ECB Occasional Paper Series, No. 369, ECB.
Becker, T and Y Gorodnichenko (2024), “Using the Returns of Frozen Russian Assets to Finance the Victory of Ukraine”, VoxEU.org, 25 April.
Cocozza, E, F Corneli, V Della Corte and M Savini Zangrandi (2023), “In search of Russia’s foreign assets”, VoxEU.org, 10 January.
Dixon, H, L C Buchheit and D Singh (2024), “Ukrainian Reparation Loan: How it Would Work”, available at SSRN 4733340.
Draghi, M (2024), The Future of European Competitiveness, European Commission, 2024.
Farrell, H and A L Newman (2019), “Weaponized Interdependence: How Global Economic Networks Shape State Coercion”, International Security 44(1): 42-79.
Financial Times (2025), “EU’s Russian Asset Plan Equals Expropriation, Warns Euroclear”, 14 July.
Havrylchyk, O (2025), “Central Securities Depositories and Geopolitical Risks: Challenges for European Policy”, IFRI Studies, November.
Hilgenstock, B, L Risinger, A Vlasyuk and E Ribakova (2025), “Implications of the Confiscation of Russian Sovereign Assets: An Analysis of the Key Economic and Financial Stability-Related Concerns”, Kyiv School of Economics Institute.
Kirshner, J (2007), Appeasing bankers: Financial caution on the road to war, Princeton University Press.
Neef, T, P Nicolaides, L Chancel, T Piketty and G Zucman (2022), “Effective Sanctions Against Oligarchs and the Role of a European Asset Registry”, EU Tax Observatory.
Novokmet, F, T Piketty and G Zucman (2018), “From Soviets to Oligarchs: Inequality and Property in Russia 1905-2016”, The Journal of Economic Inequality 16(2): 189-223.
OFAC (2014), “Enforcement information for January 23, 2014”.
Reuters (2025), “Exclusive: Europe to Hand Billions in Frozen Russian Cash to Western Investors, Sources Say”.
Sandbu, M (2025), “A ‘Bad Bank’ Can Solve Europe’s Russian Assets Conundrum”, Financial Times, 7 January.
Zucman, G (2015), The Hidden Wealth of Nations: The Scourge of Tax Havens, University of Chicago Press.
