British banks have voiced objections to a plan to channel about £8 billion of frozen Russian assets into a loan for Ukraine. Financial institutions fear legal risks and a lack of state protection in the event of lawsuits from Russia.
Resistance from financial institutions
Bankers emphasize that the authorities have not proposed an insurance mechanism against possible retaliatory actions by Russia. Sector representatives warn of likely lengthy legal disputes if the assets are used for an interest-free loan to Ukraine.
Legal and reputational risks
Information about which banks are holding these assets has not been disclosed. Commercial institutions are demanding clarity on possible liabilities and government support should lawsuits be brought against them.
The legal risk is that if Ukraine cannot repay, disputes may arise between the state and Russia over title to the assets
– Adviser to leading British banks
The government has so far not confirmed whether it is prepared to provide assistance to banks if the assets are used specifically for a lending mechanism rather than being fully expropriated.
European coordination
The British plans do not affect around £28 billion frozen under individual sanctions on Russia-linked individuals. Discussions on a reparations loan are being held in parallel with EU initiatives, but no decision has yet been agreed.
Estimates suggest talks over agreements on the use of the assets will not be completed before Christmas, although negotiations in Europe have been constructive.
Earlier, French authorities expressed disapproval of commercial banks’ participation in such a loan: Paris supports the idea of helping Ukraine but objects to using assets held in private banks because of those institutions’ contractual obligations.
- The European Commission proposed using up to €210 billion of frozen assets of the Russian central bank to help Ukraine, with an initial plan to allocate €90 billion over two years; the matter is to be considered at the EU summit on 18 December.
- German Chancellor Friedrich Merz and European Commission President Ursula von der Leyen were unable to persuade Belgium’s Prime Minister Bart De Wever to agree to a reparations loan funded by assets frozen in Belgium.
- Resolving this issue will affect budget planning in a number of countries, including funding for 2026.
