Russian sanctions give Euroclear a capital headache

By Huw Jones

LONDON Reuters – Securities settlement house Euroclear said on Wednesday it has delayed paying a dividend as it may need to set aside more capital to cover a swelling balance sheet due to Russian sanctions.

Belgiumbased Euroclear, owned by an array of big banks and exchanges like the London Stock Exchange and Euronext, ensures transactions are completed with cash exchanged for legal ownership of assets.

After Russia invaded Ukraine, the European Union barred Euroclear and rival Clearstream from serving Russian customers from Feb. 28 as Western powers severed ties with the countrys financial system.

Euroclear said on Wednesday that during the first quarter its balance sheet rose by 23 billion euros 24.41 billion yearonyear, or nearly 80.

We do not expect these sanctions to affect our financial

pperformance, Euroclear said in a statement.

pIt was now looking at what this means for “potential regulatory capital requirements” as the cashpile is expected to keep growing as sanctions remain in place for months, if not years, and redemptions and coupon payments on Russian assets fall due but cant be transferred to underlying parties.

pEuroclear is looking to reinvest the money in money market funds or instruments such as short term commercial paper while the sanctions last, and risk from such investments typically need to be covered by capital in case they turn sour.

“In light of these circumstances, the board of Euroclear considers it to be prudent to wait until the second half of 2022 to formally decide on the dividend payment of 88.5 euros per share, equating to a total of 279 million euros as announced in its fullyear results,” Euroclear said.

pEuroclear said net profit in the first quarter rose by 11 to 134 million euros.