UK launches $46 billion fund for energy traders as markets strain

Bloomberg

The UK Treasury and Bank of England launched a £40 billion ($46 billion) fund to provide energy traders liquidity to deal with massive margin calls, joining a list of European states taking dramatic action to prevent the energy
crisis becoming a “Lehman” moment.
The so-called Energy Markets Financing Scheme will provide stability for energy and financial markets, and help cut costs for consumers, the government said as Prime Minister Liz Truss unveiled a broader energy package. Denmark also moved on Thursday to shore up power companies with a $13.5 billion package, as the government said firms otherwise risk going under.
Policy makers across Europe are racing to stem the financial risks posed by the energy crisis, as surging prices prompt ballooning calls for collateral for energy trades.
Nordic governments stepped in at the weekend, saying that if they didn’t, the spillover could provoke a “Lehman Brothers” event.
European energy ministers meet on Friday and similar steps are set to be discussed, as companies are crying out for help finding the extra cash they need to guarantee trades when market prices jump. Energy company Equinor ASA has said that the industry’s margin calls amount to at least $1.5 trillion.
Bank of England Governor Andrew Bailey on Wednesday told lawmakers that the issue was causing “strain” in the energy markets that may thin out trading.
European policy makers are also examining measures such as credit lines from the European Central Bank, new products as margin collateral, and temporary suspensions of derivatives markets, according to a policy background paper seen by Bloomberg News.