April 30, 2019

ECB published results of the March 2019 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets. The results of this survey are based on responses from a panel of 28 large banks, comprising 14 euro area banks and 14 banks with head offices outside the euro area. The results reveal that, in both the securities financing market and the OTC derivatives market, credit terms offered to counterparties tightened for almost all counterparties between December 2018 and February 2019.

Looking ahead, however, a small net percentage of respondents expect price terms to ease for most counterparty types over the next three months, with non-price terms expected to remain more stable. Regarding the provision of finance collateralized by euro-denominated securities, survey respondents reported that, on balance, the maximum amount of funding had decreased and some haircuts had increased, especially for funding secured using domestic government bonds and corporate bonds. Liquidity for domestic government bonds used as collateral deteriorated somewhat according to about 30% of respondents. A similar deterioration was reported by a few respondents for all types of corporate bonds and equities. Regarding non-centrally cleared OTC derivatives, respondents indicated that conditions remained broadly unchanged.

The survey for March 2019 also included a number of special questions, which sought to offer a longer-term perspective on credit standards by comparing the current conditions with those observed one year ago. Respondents reported that, compared with a year ago, terms and conditions in the secured financing and OTC derivatives markets were, on balance, slightly tighter for all counterparty types except hedge funds and insurance companies. In net terms, credit standards for secured funding were broadly unchanged relative to a year ago, with the strong tightening observed by some respondents being offset by the easing reported by others. 

The Eurosystem conducts a quarterly qualitative survey on credit terms and conditions in euro-denominated securities financing transaction and OTC derivatives markets. The survey covers changes in credit terms and conditions over three-month reference periods ending in February, May, August, and November. The survey questions are grouped into three sections counterparty types, securities financing, and non-centrally cleared OTC derivatives.

 

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Keywords: Europe, EU, Banking, Securities, Survey Results, OTC Derivatives, Credit Terms and Conditions, Securities Financing Transactions, ECB

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