SNS/SHoF Finance panel: Volatile energy markets and new risks to the financial stability in Europe

The price of energy in Europe has fluctuated and increased dramatically following Russia’s invasion of Ukraine. The crisis has exposed weaknesses in the European energy market design. The seminar discussed different approaches to dealing with the problems.

On the market for energy derivatives, energy firms hedge the prices on exchanges that act as so-called Central Counter Parties (CCPs). CCPs diversify risks but may face systemic risks in situations of extreme price volatility and if the trading members face liquidity constraints.

The leading CCP on the Swedish market is Nasdaq Clearing. After a meeting with the Swedish Financial Stability Council, the government announced on September 14 the issuance of credit guarantees of 250 billion SEK primarily for the energy producers trading on the Nasdaq CCP, in order to reduce the risk to financial stability.

The energy crisis is pan-European, and similar conditions exist in other EU countries. The European Commission is now looking into possible European solutions and that work will most likely continue throughout the Swedish presidency next year.

 

Participants

Paulina Dejmek-Hack, Director for General Affairs, Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA) 

Karolina Ekholm, Director General of the Swedish National Debt Office 

Vincent Maurin, Assistant Professor, Swedish House of Finance at the Stockholm School of Economics

Mats Persson, Vice President, Trading and Asset Optimisation, Fortum

Daniela Peterhoff, President Clearing and Head European Markets Strategy, Nasdaq

 

The seminar was held in English and was chaired by Pehr Wissén, Professor Emeritus of Practice, Swedish House of Finance.