(MENAFN) The European Central Bank has declined to endorse a European Commission initiative that aims to use income generated from frozen Russian assets to secure a massive financial package for Ukraine, according to reports citing officials involved in the discussions.

The proposal, valued at roughly €140 billion, relies on proceeds from Russian central bank reserves immobilized within Belgium’s Euroclear system. Although EU institutions have spent months examining how to leverage these funds for what has been described as a “reparations loan” for Kiev, Belgium has repeatedly warned of legal exposure and the risk of financial instability should the bloc proceed.

According to reports, the ECB concluded that the Commission’s plan extends beyond its legal responsibilities under existing EU treaties. The initiative would require EU member governments to act as guarantors for the loan, sharing liability should Ukraine struggle to repay.

Commission officials have reportedly raised concerns that governments may not have the ability to rapidly mobilize funds during a crisis, which could trigger financial disruptions. In response, EU representatives asked whether the ECB could serve as a backstop for Euroclear Bank to prevent a liquidity crunch.

Officials at the central bank indicated that this was not an option.

“Such a proposal is not under consideration as it would likely violate EU treaty law prohibiting monetary financing,” the ECB said.

MENAFN02122025000045017281ID1110425183