Euroclear Bank

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Head office of Euroclear Bank and of the Euroclear Group in Brussels Brussels - Euroclear HQ.jpg
Head office of Euroclear Bank and of the Euroclear Group in Brussels

Euroclear Bank is the international central securities depository (ICSD) of the Euroclear Group, based in Brussels, Belgium. It is one of the world's two main ICSDs, the other one being Clearstream Banking SA in Luxembourg.

Contents

As of 2018, it was the third-largest CSD by value of securities held, behind only Fedwire Securities Service and the Depository Trust Company, and the world's leading CSD by value of delivery instructions. [1] : 69 

Overview

Euroclear Bank building in Krakow, Poland Euroclear w Krakow Bonarka for Business 2017.jpg
Euroclear Bank building in Kraków, Poland

On 31 December 2000, Euroclear Bank took over the operation of the Euroclear System from Morgan Guaranty, which had initiated it in 1967-1968. [2] : 286 

As of 2023, Euroclear Bank maintained branches in Hong Kong, Kraków, and Tokyo as well as representative offices in Beijing, Dubai, Frankfurt, New York, and Singapore. [3] : 15 

Supervision

As a licensed bank, Euroclear Bank is subject to European Banking Supervision and supervised as such by the National Bank of Belgium (NBB) under the oversight of the European Central Bank (ECB), having been designated by the latter as a so-called Less Significant Institution. As a CSD, Euroclear Bank is licensed and supervised by the NBB and, albeit to a lesser extent, by Belgium's Financial Services and Markets Authority. [3] : 17  In addition, a Multilateral Oversight Group (MOG) has been formed as a cooperation arrangement related to the oversight of Euroclear Bank, which includes the Federal Reserve Board of Governors, the Federal Reserve Bank of New York, Bank of England, Bank of Japan, Reserve Bank of Australia, plus the ECB as observer. [3] : 18 

Involvement in international sanctions during the Russo-Ukrainian War

In October 2012, Euroclear granted access to Russia’s National Settlement Depository, making it easier for other countries hooked to Euroclear's system to trade with Russia, and making Russia’s capital market integrated into London's and New York's markets. [4] 3 years later, Russia mimicked the Euroclear System to create an exchange system with China. [5]

In an article in Foreign Affairs and in a subsequent interview, economist Benn Steil, a senior fellow and director of international economics at Council on Foreign Relations (CFR), and CFR analyst Benjamin Della Rocca argued that Russia may have - in transactions executed through the Central Bank of China and then likely through Chinese state-owned banks as intermediaries - deposited $80 billion in U.S. Treasury bonds at Euroclear in the buildup to the 2022 Russian invasion of Ukraine. [6] [7]

The Russian depository blocked and froze all securities held in Euroclear's account at the Russian depository, on March 1, 2022. [8] The Russian depository also froze payments on securities of Russian issuers from being made to foreign individuals and entities. [8]

On March 18, 2022, Euroclear restricted operations on the account of the Russian National Settlement Depository; it stopped executing any instructions to carry out transactions with securities and money, including instructions to participate in corporate actions on foreign securities. [8]

Euroclear also disabled its ruble accounts with ING Bank in Russia and Russia's VTB Bank, the result of which was that its clients are no longer allowed to transfer any rubles, and the ruble bridge between Clearstream and Euroclear was closed. [8] Furthermore, Euroclear limited settling trades in Russian securities. [9] [10]

Involvement in sovereign credit events

Argentina

On 25 March 2015, New York federal judge Thomas Griesa ordered Euroclear to stop processing payments of Argentina's debt bonds. [11] [12] This court injunction follows Argentina's decade-long dispute with its creditors. [13] The next day, the trading bridge between Euroclear and Clearstream on those Argentine bonds were also shuttered until further notice. [14] The intent of this injunction was to force Argentina to fully pay their creditors in order to gain back access to its bond-selling program. [15]

Greece

In April 2012, Euroclear participated in the restructuring of the Greek debt by swapping 41 billion euros of Greek bonds, which represented about a third of the foreigner-held Greek debt. [16]

Russia

In June 2022, Euroclear participated in blocking Russian funds. [17]

See also

References

  1. ↑ Morten Linnemann Bech, Jenny Hancock, Tara Rice & Amber Wadsworth (March 2020), "On the future of securities settlement" (PDF), BIS Quarterly Review, Basel: Bank for International Settlements{{citation}}: CS1 maint: multiple names: authors list (link)
  2. ↑ Peter Norman (2007). Plumbers and Visionaries: Securities Settlement and Europe's Financial Market. London: John Wiley & Sons.
  3. 1 2 3 Belgium: Financial Sector Assessment Program-Detailed Assessment of Observance-Assessment of the CPSS–IOSCO Principles for Financial Market Infrastructures Euroclear Bank, International Monetary Fund, 8 December 2023
  4. ↑ Ben Aris (4 October 2012). "Russia joins Euroclear". Financial Times. Retrieved 2016-05-08.
  5. ↑ Vladimir Kuznetsov (3 September 2015). "Russia Mimics Euroclear With China Market Link as Ties Grow". Bloomberg.com. Retrieved 2016-05-08.
  6. ↑ "Evidence shows China helped Russia hide $80 billion in Treasury securities offshore". www.donga.com.
  7. ↑ "Russia stashed away billions before invading Ukraine. China may have helped hide it". NPR.org.
  8. 1 2 3 4 "NSD fully open to dialogue with Euroclear, Clearstream, no blocks on its part - MOEX". interfax.com.
  9. ↑ "Sanctions delay payments to Russian corporate Eurobond holders". Financial Post. March 23, 2022.
  10. ↑ Lomax, Securities Finance Times reporter Jenna. "DTCC blocks Russian securities from Bank of Russia". www.securitiesfinancetimes.com.
  11. ↑ "BRIEF-U.S. court orders Euroclear not to process Argentine debt payments". Reuters.com. 25 March 2015. Retrieved 2016-05-12.
  12. ↑ "Griesa blocks Euroclear from processing any Argentina bonds payments". Mercopress.com. 26 March 2015. Retrieved 2016-05-12.
  13. ↑ Davide Scigliuzzo (31 March 2015). "Euroclear will not make payments on some Argentine bonds". Reuters.com. Retrieved 2016-05-12.
  14. ↑ David Scigliuzzo, Paul Kilby (26 March 2015). "Euroclear stops trading with Clearstream on some Argentine bonds". Reuters.com. Retrieved 2016-05-12.
  15. ↑ Elaine Moore, Philip Stafford (30 March 2015). "Argentina in last-ditch manoeuvre to pay bondholders" . Financial Times. Archived from the original on 2022-12-11. Retrieved 2016-05-12.
  16. ↑ "Euroclear Bank Efficiently Swaps 30% Of Foreigner-Held Greek". Mondovisione.com. 2 April 2012. Retrieved 2016-05-12.
  17. ↑ "Russia's Latest Eurobond Coupons Are Stuck at Euroclear". Bloomberg News . 7 June 2022. Archived from the original on 7 June 2022.


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