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ECB ups scrutiny of banks amid energy crisis


In light of the deepening dispute over Russian gasoline supplies, the European Central Bank is having more in-depth conversations with financial institution executives about their readiness for a potential rise in corporate defaults and a drying up of liquidity in the energy market.

According to people familiar with the situation, the Frankfurt-based financial institution watchdog wrote to lenders last month advising them to look into how a gasoline shortage would affect their businesses. The people, who asked to not be identified because the communication is private, said that responses are due in the middle of September and that follow-up discussions should be returned by the end of this month.

In reaction to sanctions over Ukraine, Russia sought to cut off supply through its main Nord Steam pipeline to the region, setting back Europe’s efforts to avert a full-blown energy crisis.

Banks are experiencing increasing losses as the energy crisis worsens, and many lenders’ plans to pay out large dividends to investors after several years of hardship are now likely in jeopardy.

Individually, ECB President Christine Lagarde stated on Friday that the institution’s financial coverage element is “prepared to offer liquidity to banks, to not vitality utility corporations,” in response to the disaster.

“In this present, very risky atmosphere, it is vital that fiscal measures be put in place to offer liquidity to solvent energy-market members, specifically utility corporations,” she informed an information convention in Prague.

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