Implications of Russian sanctions
The sanctions imposed by the US, the EU and other jurisdictions, as well as Russian countermeasures, resulted in a loss of Russia-related business income which was more than compensated by increased interest income.
The cash on the balance sheet has increased as blocked coupon payments and redemptions accumulate. At the end of September, Euroclear Bank’s balance sheet increased by €88.7 billion year-on-year to a total of EUR 119.9 billion.
As per Euroclear’s standard process, the cash balances arising from the sanctions are invested which, depending on the prevailing interest rates, results in interest income. Over the nine months, revenues on cash balances arising from sanctions on Russia was EUR 340 million.
With the growth of sanctioned liabilities and the increase of interest rates, the materiality of revenues on cash balances arising from sanctions on Russia on the group’s financial results is unprecedented. As such, the Board considers it necessary to separate these earnings from the underlying financial results when assessing the company’s performance and resources.
The Board expects interest income to continue to grow materially as blocked payments and redemptions continue to accumulate in a rising interest rate environment.
As previously outlined, while this is expected to have an impact on the balance sheet, it should not result in material change in credit risk profile and therefore will not have a meaningful impact on the group’s capital ratios.
The Board recognises that the unexpected profit should be managed prudently, in line with its corporate purpose and considering its responsibilities towards stakeholders and society. Euroclear continues to act in a transparent manner with all authorities involved. The Board will continue to act cautiously by retaining any profits related to the Russian sanctions until the situation becomes clearer.