ECB Issues Results of September Survey on Credit Terms and Conditions

The results reveal that overall credit terms offered to counterparties remained, on balance, broadly unchanged between June and August 2019 in both the securities financing market and the OTC derivatives market. However, price terms for sovereigns and insurance companies tightened. Additionally, non-price terms for banks and dealers and investment funds tightened. A deterioration in liquidity conditions and in the financial strength of counterparties were the main drivers underlying this tightening. Looking ahead, a small net percentage of respondents expect overall terms to ease for most counterparty types over the next three months. Respondents reported that all counterparty types, except hedge funds, had intensified their efforts to negotiate more favorable price and non-price terms over the past three months.

Regarding the provision of finance collateralized by euro-denominated securities, the maximum amount and maturity of funding continued to decline, especially for funding secured with government bonds. Financing rates or spreads decreased for funding secured with most types of collateral, in particular for convertible securities and corporate bonds. Demand for funding continued its declining trend across all types of collateral, notably equities. For most types of collateral, overall demand for funding has now fallen in more than four consecutive reference periods. For non-centrally cleared OTC derivatives, initial margin requirements increased somewhat, while liquidity and trading deteriorated slightly for interest rate, equity, and foreign exchange derivatives.

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. The questions focus on how terms have tightened or eased over the past three months, regardless of longer-term norms, why they have changed, and expectations for the future. 

Related Links

• Press Release
• Survey Results (PDF)
• Survey Guidelines (PDF)
• Detailed Data Series (ZIP)

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