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On 12 February 2024, the Council of the EU adopted a new Regulation (EU) 2024/576 (“Regulation”) setting out the rights and obligations of Central Securities Depositories (“CSD”) holding assets and reserves of the Central Bank of Russia (“CBR”) that are immobilised because of the EU’s restrictive measures. That Regulation is the next step in a political process aiming to make Russia pay for the reconstruction of Ukraine, which we reported on in our earlier briefing (available here).
Background
In response to Russia's invasion of Ukraine in February 2022, the European Union imposed sanctions on the CBR and associated entities and persons.
Those sanctions included restrictions in relation to various direct or indirect transactions that would benefit the CBR or associated entities and persons, such as transactions related to the management of assets and reserves of the CBR as well as making new loans or credits to the CBR.
The restrictions in relation to those transactions with the CBR have apparently led to an extraordinary and unexpected accumulation of cash balances on the balance sheets of CSDs.
Over the past months, the European Commission has been entertaining the idea and ambition of using those funds to rebuild Ukraine. As a forerunner to that, however, the EU needs to gain visibility on the amount of the funds at stake, as well as ensure that those funds remain available until a political decision is reached on the use of those funds. This is where the new Regulation comes in.
Obligations of CSDs in managing Russian assets
As of 15 February 2014, the new Regulation imposes several obligations on CSDs that manage assets and reserves of the CBR or any person or entity acting on its behalf or at its direction whose cumulative value exceeds EUR 1 million (“Affected Assets”):
What now?
The Regulation's amendments bring some clarity for the CSDs and seem to be a first step towards using Russian assets for the reconstruction of Ukraine. It will, however, take a further decision at the EU level to have these funds directed to the support of Ukraine.
If you would like to discuss any aspect of the new regime, please reach out to the contacts on this post or to your usual Linklaters contact(s).
28 February 2024
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