In the wake of Russia's invasion of Ukraine in 2022, assets belonging to the Central Bank of Russia (CBR) held by European Union (EU) financial institutions were effectively "immobilized." However, a recent decision and regulation approved by the European Council have clarified the obligations of Central Securities Depositories (CSDs) that are currently holding CBR assets and reserves.
The European Council press release reveals that following Russia’s full-scale invasion of Ukraine in February 2022, the EU imposed prohibitions on transactions related to managing CBR reserves and assets. It is estimated that around €260 billion in CBR assets have been immobilized in the form of securities and cash within the jurisdictions of the G7 partners, the EU, and Australia.
The press release further explains that the clarification and regulation adopted this week clearly state that "CSDs holding more than €1 million" of CBR’s assets must account separately for extraordinary cash balances that have accumulated since these restrictions were implemented. Moreover, CSDs are required to keep corresponding revenues separate and are prohibited from disposing of net profits.
Acknowledging the risks and costs associated with holding CBR’s assets, according to the press release, each central security depository will be allowed by the council to request its supervisory authority for permission to release a share of net profits. This would be in accordance with statutory capital and risk management requirements.
Finally, as stated in the press release, G7 leaders agreed in December 2023 that these extraordinary revenues derived from CBR’s immobilized assets would necessitate decisive progress. This includes directing revenues towards supporting Ukraine's recovery and reconstruction efforts.