Europe’s energy market has grown into one of the largest and most sophisticated in the world. Yet, unlike the financial sector, it lacks the institutional backbone that guarantees stability when shocks occur. In banking, confidence is underpinned by the existence of a central banks, a lender of last resort that steps in to provide liquidity and prevent systemic collapse.
By Benjamin Lakatos, MET Group
In energy, there is no such mechanism. The absence of a financial safety net leaves the market vulnerable to volatility and crises that can quickly spiral out of control.
The energy turmoil of 2022 made this painfully clear. What began as a supply shock rapidly turned into a confidence and liquidity crisis. Market participants struggled to meet margin calls, credit lines evaporated, and even sound companies were forced to scramble for cash. Prices soared to unprecedented levels, not only because gas was scarce, but because the system itself began to seize up.
At MET Group, we estimate 50 to 60 percent of the price increase during that period could have been avoided if Europe had possessed an institutional framework similar to the financial markets. The lesson is clear: supply matters, but confidence and liquidity matter equally. Europe’s energy system needs a stabilising market mechanism and institution, a European Energy Bank, that can provide both.
It would be designed to make energy markets more reliable and resilient against sudden shocks. Modelled on central bank principles, it would operate as a regulated system to standardise operations and provide liquidity where needed.
It could deploy tools like those used in financial markets: circuit breakers to calm volatility, liquidity facilities to support short-term funding needs, and mechanisms for assessing creditworthiness and setting equity requirements. The goal is straightforward: keep energy markets functioning smoothly even in times of stress.
The Energy Bank could be established either as a new independent institution or as a specialised agency operating under the supervision of the European Central Bank. In either model, its role would be like that of the ECB toward commercial banks: ensuring stability, reliability, and trust in the system.
Some might ask whether the European Investment Bank (EIB) already fulfils this role. The EIB focuses primarily on long-term project financing, supporting renewable energy, infrastructure, and innovation. The European Energy Bank, however, would deal with short-term liquidity and market stability.
It would not compete with the EIB but complement it. The EIB funds the energy transition; the Energy Bank would safeguard the market mechanisms that allow that transition to happen. In essence, one would invest in the future, while the other would secure the present. Together, they would form a more complete institutional foundation for Europe’s energy system.
Beyond its immediate stabilising function, it could also become a flagship initiative of the EU’s emerging Clean Industrial Deal. By improving liquidity and reducing systemic risk, it would strengthen investment conditions and align energy policy more closely with Europe’s competitiveness agenda.
Such an institution would send a clear signal: Europe is not only committed to decarbonisation, but also to maintaining a stable and investable energy system. It would reassure markets, attract private capital, and demonstrate that the EU is serious about building the financial architecture needed for a sustainable and competitive energy future.
Following the 2022 energy crisis, we held informal consultations with officials from the European Council and the European Commission, outlining the logic and necessity of a financial backstop for energy markets. However, policymakers then were understandably focused on short-term emergency measures like storage mandates, price caps, and consumption reductions. The idea of creating a permanent institution to address long-term structural weaknesses did not receive much attention.
Now, the need is even clearer. The market potentially remains exposed to liquidity shocks, while investment in energy infrastructure and security of supply depends on stable, functioning markets. If another crisis hits, whether driven by geopolitics, weather, or financial contagion, the same vulnerabilities could reappear.
Creating a European Energy Bank would require political will, regulatory clarity, and coordination among existing institutions. But the alternative, another round of uncontrolled market panic and price explosions, would be far more costly.
Energy is the lifeblood of our economy. It deserves the same level of institutional protection that our financial systems enjoy. A European Energy Bank would provide that stability, ensuring that Europe’s energy markets remain liquid, predictable, and credible even in turbulent times.
The 2022 crisis showed what happens when confidence disappears. The next crisis could show what happens when Europe finally builds the institutions it needs. It is time to move from improvisation to preparation. A European Energy Bank would be a vital step in that direction.