I had been a bank treasurer for twenty years, which means I’ve learned to sleep lightly and dream of balance sheets. So when the memo arrived on a wet Monday in December — stamped “URGENT — EUROPEAN COUNCIL DECISION” — the room filled with a familiar kind of electric worry. The headline said the thing everyone in our trade had been bracing for: the EU had agreed to an indefinite freeze of Russian sovereign assets held inside the bloc. Behind the headline, the numbers were blunt: roughly €210 billion of immobilised reserves, plus tens of billions of private assets.
My first instinct was prosaic. Get the lawyers on the line. Pull up the ledger. But the technical problem — the accounting problem — was the real beast.
For decades, the balances we and other EU credit institutions held on behalf of the Russian central bank and other Russian entities had been booked as deposits on our books. In accounting terms, that’s simple: deposits are liabilities. The central bank’s claim on that cash — its asset — sits on the other side of the system, somewhere in Russia’s consolidated accounts. The freeze changed the cash’s movability, not (officially) its legal ownership. As the European Commission put it in guidance, “that asset of the Russian Central Bank — and as such that liability of the financial institution to repay — will not be touched, where there is no interference in the property rights.” But the prohibition on transfers created an “extraordinary and unexpected accumulation of cash balances on the balance sheets of financial institutions.”
That phrase — “accumulation of cash balances” — is where the nightmares begin for a treasurer. Liquidity buffers had grown, sometimes dramatically, as blocked client funds sat idle. On paper this made our short-term liquidity position look healthier: more cash, more high-quality liquid assets. But the regulatory and economic reality was trickier. Liquidity Coverage Ratio (LCR) rules, capital adequacy frameworks and large-exposure limits weren’t designed around indefinitely immobilised third-party sovereign cash sitting in savings accounts that legally could not be transferred. The European Banking Authority and national supervisors were already probing what extraordinary immobilisation meant for LCR, net stable funding ratio and the way we present those items in financial statements.
Then came the conversation that would unsettle the CFO and our auditors: what if we reclassified those balances on the balance sheet — not as deposits, but as “net assets” or some kind of restricted asset? Technically, flipping a line from “deposits (liabilities)” to “assets” would change the mathematical symmetry of the ledger, and with it the narrative investors, regulators and rating agencies read into our books.
On the face of it that move made no legal sense. The funds are someone else’s property; they’re not ours to recognize as assets without risking violation of property-rights principles under IFRS and EU law. The Commission’s guidance insisted on preserving the legal reality: immobilisation restricts transfer, not property. But accounting is as much about representation as it is about legality. If the cash is practically unusable — if it cannot be deployed to meet contractual obligations or pledged as collateral — should we present it the way contracts say we must, or present it the way economics says our stakeholders will understand? The former keeps auditors calm; the latter keeps markets honest. Either choice invites confusion.
Outside the office the geopolitics were noisier. Brussels was discussing whether and how frozen sovereign reserves could be used to support Ukraine — as collateral for loans, as part of a reparations mechanism, or under other legal frameworks. The Council’s December decision to freeze assets indefinitely had immediate policy implications: it removed short renewal cycles and opened the way to proposals to use immobilised funds to back multiyear financing for Kyiv. Governments, think tanks and commentators argued about law and precedents; Moscow called the moves illegal and threatened retaliatory actions, including legal suits against custodians like Euroclear.
Back at the bank we staged a small, ugly war game. The legal team scrawled “ownership ≠ transferability” and “IFRS recognition rules” across the whiteboard. The audit partner reminded us of IAS 32 and IAS 1 presentation rules — liabilities remain liabilities until extinguished. Our risk folks modelled capital ratios under three scenarios: (1) leave classification unchanged and accept higher reported liquidity, (2) reclassify to a restricted asset and face audit disagreement, or (3) carve out a footnote-led presentation explaining economic immobility but keeping legal classification. Each path had winners and losers: investors would complain if they felt misled; regulators would complain if we muddied the legal record; internal treasury KPIs would distort if we shifted numbers to game metrics instead of reality.
In the end we did what cautious accountants often do: we did the minimum necessary to inform. We left the legal classification as deposits (liabilities) — because the contracts and property rights demanded it — but we rewrote our disclosures. We added a clear, prominent note: the balances are immobilised under EU decisions; transfers are prohibited; the cash is functionally restricted and cannot be used for pledge, repo or cash management. We modelled the worst-case capital and liquidity outcomes in stress testing scenarios and handed the results to supervisors. We also mapped counterparty risk: custodians, central securities depositories and payment systems — because if Euroclear or another keeper became the target of litigation, the operational chain could snap.
That disclosure route felt like a compromise, but compromise is often the honest shelter in the storm. It acknowledged the legal truth, told the economic story, and left regulators — not us — to decide if policy would turn immobilization into reappropriation. Already, debate in Brussels and among policy wonks was intense: to use immobilised assets as a backstop for Ukraine would require legal architecture, parliamentary approvals and careful treaty-work. It might also set a precedent that central banks and sovereigns would remember for generations.
Weeks later, in a meeting with the CEO, I read the ledger aloud: a row of numbers, cold and stubborn. “We don’t own it,” I said. “We can’t touch it. But if we pretend it isn’t there, we’re lying to ourselves.” She nodded. “Then tell the story,” she said. “Tell it plainly.”
So we did. In the financial statement notes we described the immobilisation, quantified the balances, explained the legal position, ran the stress tests, disclosed the potential policy pathways being debated in Brussels, and signposted the litigation risks. The auditors demanded language tightened; our regulators asked for the stress models. Outside, commentators debated the ethics of using frozen sovereign cash for war reparations. In the markets, our share price wobbed for a day and then settled — which is the real signal that accounting is also a language of trust.
Years later, when a new treaty finally sketched ways to channel immobilised sovereign reserves toward reparations and reconstruction, people would look back at those footnotes and see the moment the accounting world met geopolitics. For me, the lesson was simple and stubborn: numbers are precise, but their meaning is not. How you classify a line on a balance sheet can alter not only a bank’s ratios, but how a society decides to convert frozen capital into policy. And when that happens, treasurers and storytellers of every kind must be ready to explain — sharply, plainly, and without pretending the ledger is anything other than what the law and the facts make it.
— End
All names of people and organizations appearing in this story are pseudonyms
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