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ECB Examines Risks of Derivatives Use By Utilities

ENERGY

The ECB is examining the risk to financial stability with the use of derivatives by energy companies, according to Reuters.

  • The inquiry was prompted by Germany's rescue of gas importer Uniper, which like other energy firms hedged its exposures with derivatives worth tens of billions of euros, far outstripping the value of the energy it sold, sources told Reuters.
  • Energy companies do not have the regulatory oversight applied to banks, which are required to hold cash securities against potential losses.
  • "Energy companies pose specific risks not only to financial stability. They are often also of systemic importance for the economy as a whole," a spokesperson of Germany’s financial regulator BaFin said
  • "We are therefore in close dialogue with energy supervisors to address all kinds of risks," the spokesperson added.
  • Results are expected to be outlined in the coming days.

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