Fitch Warns About the Consequences of Seizing Russian Assets
According to TASS news agency, the credit rating agency Fitch has warned the European securities settlement and custody institution, the Belgian company “Euroclear,” about the consequences of seizing Russian assets and the potential downgrade of its credit rating.
Fitch stated in a release that Euroclear Bank has been placed on “Rating Watch with Negative Outlook,” which could lead to a reduction of the institution’s AA credit rating.
Fitch explained that this decision reflects the agency’s view on the potential increase in liquidity and legal risks for Euroclear Bank and its holding company, related to the European Commission’s plans to use blocked Russian central bank assets to provide compensation loans to Ukraine.
Fitch added that these risks are also linked to a decision taken by EU countries last week, under which Russian assets will be blocked indefinitely, replacing the current mechanism that allowed the six-month extension of the freeze.
According to Fitch, from their perspective, there is a growing likelihood that insufficient legal and liquidity support, if Russian central bank debts mature and become payable, could cause a mismatch in Euroclear’s balance sheet.
The statement further noted that if the legal protections built into the compensation loan structure are insufficient, the risk of legal claims could increase significantly.
At the same time, Fitch emphasized that its base scenario still assumes that if the European Commission proceeds with the compensation loan programs, comprehensive legal and liquidity support will be provided as part of the mechanism for Euroclear Bank, allowing its credit profile to remain consistent with a long-term AA rating.
According to the report, on December 12, the EU Council decided to block Russian sovereign assets indefinitely.
The European Commission hopes to reach a decision to seize €210 billion of Russian assets at the EU summit on December 18–19, of which €185 billion are blocked via Euroclear.
Source: Tasnim
