On 15 September 2022, the EBA published a letter that the European Commission had sent to both it and the European Securities and Markets Authority regarding a response to the current level of margins and of excessive volatility in energy derivatives markets.

The letter outlines that, with the sharp rise in gas and electricity prices over the past year, energy companies have been required to post correspondingly higher amounts of cash collateral to central counterparties (CCPs) as margin calls have risen in line with prices. This has resulted in problems of liquidity in EU energy companies, which have been addressed in some Member States in the form of public guarantee schemes but that have also promoted calls for amendments to the rules governing collateral requirements for margin calls.

Furthermore, the letter notes that credit institutions play a major role in providing clearing services to those non-financial counterparties which do not or are not permitted to access CCPs directly. As non-financial counterparties face difficulties accessing cash or other types of high-quality liquid assets they could post as collateral for their energy derivatives cleared activities, the letter states that it would be worthwhile reflecting on the role financial institutions play by:

  • Exploring possible ways to facilitate the provision of guarantees that could be posted as collateral by non-financial counterparties.
  • Assessing how and to what extent banks currently provide collateral transformation services.
  • Considering any possible other measures to minimise the liquidity challenges currently faced by energy companies, including ways to improve the transparency, volatility and predictability of margin calls, in particular intraday.

The letter asks that this request be dealt with urgently and that proper consideration is given by 29 September at the latest.