France shielding €18bn Russian asset pot from EU ‘reparations loan’ push: Paris guarded names of private banks holding world’s second biggest accumulation of immobilised Russian state funds

5 comments

1. France is under mounting pressure to help finance Ukraine by using €18bn of Russian sovereign assets largely immobilised at private banks whose identities Paris has kept under wraps for more than two years.

   To the irritation of some other European capitals, France has withheld any details on the institutions holding the Russian state funds and how any interest accrued is used, claiming it is an issue of client confidentiality.

   The holdings have come under renewed scrutiny as the European Commission pursues a plan for a “reparations loan” to Ukraine backed by Russian central bank assets under sanctions. The latest proposal aims to use funds frozen across the EU and not just the main €185bn holding at Euroclear, the Brussels-based central securities depository.

   The assets in France — whose precise whereabouts and custodians remain unknown to other capitals — are the second-biggest accumulation of immobilised Russian central bank assets in Europe. Euroclear has been forced to reveal the amount it holds.

   “The dealings of commercial banks with central banks and foreign reserves are possibly the least transparent segment of the global financial market,” said Nicolas Véron, a senior fellow at the Bruegel think-tank. “Nobody wants to disclose to the world where they put their money.”

   The commission plan aims to address the long-standing objections of Belgium, which wants assets in France and other countries to be part of any loan arrangement. Belgium argues that Euroclear has until now been singled out unfairly, leaving it more vulnerable to retaliation by Russia and the financial risks of any loan scheme.

   French officials, while backing the concept of a reparations loan, have indicated they are opposed to the scheme involving assets held at commercial banks, arguing the lenders are subject to different contractual obligations from those at Euroclear.

   After the €185bn at Euroclear, almost all the remaining €25bn of Russian state assets are immobilised at commercial banks in France and Belgium, according to several people familiar with the matter. Russia’s assets in a handful of other EU countries are significantly smaller.

   The €18bn of Russian central bank assets in France are largely in commercial banks, according to four people familiar with the matter. Belgium also holds €7bn in commercial banks, in addition to the funds at Euroclear, two of the people said.

   But the names of the banks have been kept under wraps. “This is market-sensitive information — it’s the same as if doctors would be publicly discussing medical records,” commission spokesperson Olof Gill told the Financial Times.

   It is unclear how many banks in France are holding the assets, although three people briefed on the matter said they understood the bulk was at the country’s biggest lender, BNP Paribas. BNP declined to comment.

   Crédit Agricole and Société Générale also declined to comment, while BPCE, France’s fourth-biggest bank, did not respond to a request for comment.

   BNP Paribas Fortis, Belgium’s largest lender and a subsidiary of the French bank, did not respond to a request for comment. KBC and Belfius declined to comment when asked about whether they hold Russian central bank assets, citing confidentiality.

   Euroclear has made profits from cash arising from the stuck Russian central bank assets — mostly as securities Moscow held with Euroclear have matured — but it has no contractual obligation to pay Russia interest. The resulting profits have been deemed a “windfall” that is being used to back a $50bn loan for Ukraine.

   Private lenders, by contrast, would typically be obliged to hold and ultimately pay all or some interest to Russia arising from cash deposits. But the contractual terms vary and some banks have been able to accumulate interest from holding the Russian assets, according to the people familiar with the arrangements.

   “Central securities depositories do not owe any interest to Russia. That is possibly a major difference compared to the central bank reserves that are held by commercial banks, which may owe the interest,” said Gill.

   Under the commission’s plan for the reparations loan, the EU would cover any kind of interest owed by financial institutions to the Russian central bank “under the terms of the relevant contracts”.

   Last year, Euroclear’s “interest earnings” from Russian central bank assets amounted to €5.4bn, and in the first six months of this year they were €2.4bn. Much of it funded Ukraine’s loan, according to Euroclear filings.

   Since Euroclear’s holdings dwarf those in the rest of Europe, they have dominated EU political discussions so far. “The French banks are followers on this one, they have no desire to engage with the discussions,” said one of the people in Paris familiar with the asset freezes.

   The Élysée presidential office declined to comment on the French-held assets, as did the French Treasury, the central bank and the economy ministry.

   By contrast, shortly after Russia’s invasion of Ukraine in February 2022 the ministry had publicised the seizure of yachts and houses owned by sanctioned oligarchs. It said at the time that about €22bn of Russian central bank placements had been frozen, with Tracfin, the ministry’s financial intelligence unit, detailing that a “large French bank” had alerted officials that Moscow had sought to repatriate the assets.

   EU leaders are due to discuss the reparations loan plan at a summit in two weeks.

2. So they want Belgium to hand over the cash but they’re hiding theirs?

   Seems a bit hypocritical

3. Almost every EU country is corrupt on Russian money, they have their benefits and don’t want to lose money.

4. They’re probably too afraid they wont get any more of wealthy russian tourists if they seize this money

5. This is one of Belgium’s arguments: seize all the assets, not only theirs.

Comments are closed.