Photo: EPA / Olivier Matthys

Fitch Ratings has placed the long-term ratings of Euroclear Bank and Euroclear Holding on Rating Watch Negative (RWN) due to a European Commission proposal to use immobilized assets of the Russian central bank to provide a reparations loan to Ukraine, the agency reported on its website.

Fitch noted that the Commission’s plan creates potential risks for Euroclear, including liquidity gaps and lawsuits from Russia, where most of the assets are held.

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At the same time, Fitch’s baseline scenario assumes that Euroclear will provide comprehensive guarantees if the loan is launched, which would help maintain its current high rating of ‘AA’.

Fitch highlighted Euroclear Bank’s strong market position as one of Europe’s leading central securities depositories, its scalable business model, and high capitalization. The agency believes that even if the reparations loan is implemented, Euroclear will be able to maintain sustainable profitability and manage operational risks, including the impact of sanctions and counter-sanctions.

Fitch will remove the RWN designation once sufficient clarity and details are provided on the format of the reparations credit, if it is ultimately realized.

The agency also noted that even if an agreement is reached at the European Council meeting on December 18–19, it would still need to be implemented at the EU and individual member state levels.