ECB Issues Results of September Survey on Credit Terms and Conditions
ECB published results of the September 2020 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets. The survey respondents reported an easing of credit terms and conditions over the June 2020 to August 2020 review period. This represents a partial reversal of the widespread tightening of credit terms and conditions observed in the previous two survey rounds. Additionally, the initial margin requirements decreased for almost all types of OTC derivatives. ECB also published survey guidelines and detailed data series on the survey.
The survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets is conducted four times a year and covers changes in credit terms and conditions over three-month reference periods ending in February, May, August, and November. The results of the September 2020 survey are based on responses from a panel of 26 large banks, comprising 14 euro area banks and 12 banks with head offices outside the euro area. Respondents reported a significant easing of overall credit terms for all counterparty types. This overall easing masks some divergence between price and non-price terms. Whereas price terms eased significantly, non-price terms on balance tightened for all counterparty types, except banks. Respondents mainly attributed the easing of price terms to an improvement in general liquidity and market functioning, but they also suggested that the willingness to take on risk as well as the competition from other institutions were additional motivations for offering more favorable conditions to counterparties.
The survey respondents also reported increased pressure from all counterparty types, except investment firms, to obtain more favorable conditions, with this being the most pronounced from non-financial corporates. The maximum amount and maturity of funding offered against euro-denominated collateral increased for most types of collateral. Haircuts applied to euro-denominated collateral and financing rates or spreads decreased for funding secured by nearly all types of collateral. Moreover, the demand for funding of all collateral types except equities weakened. In a reversal of the situation reported in the June 2020 survey, participants saw the liquidity of collateral improving for all collateral types and collateral valuation disputes decreasing. Finally, the initial margin requirements decreased for almost all types of OTC derivatives. Respondents also reported that the maximum amount of exposures had decreased for OTC equity and commodity derivatives. Liquidity and trading deteriorated for credit derivatives referencing structured credit products as well as for equity and interest rate derivatives. The volume, duration, and persistence of valuation disputes decreased across all types of derivatives.
Related Links
Keywords: Europe, EU, Banking, Securities, Insurance, SESFOD, OTC Derivatives, Credit Terms and Conditions, Credit Risk, Margin Requirements, Securities Financing Transactions, ECB
Previous Article
EBA Updates Guidance on Disclosures for Identification of G-SIIsRelated Articles
BIS Quarterly Review Discusses Developments in Fintech and ESG Space
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
BCBS to Consult on Supervisory Practices for Climate Risks by Year-End
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
OCC Identifies Operational Risk Deficiencies in MUFG Union Bank
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
EC Rule on Contractual Recognition of Write Down and Conversion Powers
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
ECB to Consider Climate Risks When Reviewing Collateral Framework
In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.
SRB Provides Update on Approach to Prior Permissions Regime
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
APRA Issues Further Guidance on Application of Securitization Standard
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
ACPR Publishes Corrective Version of RUBA Taxonomy
The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.
Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
