The news: As a continent-wide energy crisis looms, the European Central Bank is reportedly urging lenders to prepare for the worst amid fears that Russia could cut off gas supplies, according to Bloomberg.
ECB’s warning: The central bank privately wrote to banks last month, urging them to scrutinize the impact of a gas stoppage, including the heightened risk of companies defaulting, according to Bloomberg, which cited people familiar with the matter.
- Responses are due in mid-September, and the ECB will carry out follow-up conversations with bank executives by the end of the month.
- Separately, ECB President Christine Lagarde said the central bank is “ready to provide liquidity to banks, not to energy utility firms.”
The bigger picture: European energy prices have soared in recent months after Russia began limiting the supply of natural gas through its Nord Stream 1 pipeline in response to sanctions. In the UK, energy bills are expected to jump 80% this winter, per the country's energy regulator Ofgem. If energy companies fold in the wake of a crisis, the banks that lend to them could be hurt.