ECB Issues Results of September Survey on Credit Terms and Conditions
ECB published results of the September 2019 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets. The September 2019 survey collected qualitative information on changes between June and August 2019. The results 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. ECB also published guidelines and detailed data series related to the survey.
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
Keywords: Europe, EU, Banking, Insurance, Securities, Survey Results, OTC Derivatives, Credit Terms and Legal Conditions, Securities Financing Transactions, Margin Requirements, ECB
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Trevor Howes
IFRS 17 technical advisor; AXIS actuarial modeling system expert; extensive experience in life insurance and life reinsurance, with focus on modeling, valuation, and financial reporting
Previous Article
CBO Releases Financial Stability Report for 2019Related Articles
APRA Reviews Repayment Deferral Plans, Identifies Best Practices
APRA has concluded its review of the comprehensive plans of authorized deposit-taking institutions for the assessment and management of loans with repayment deferrals.
ESAs Assess Risks to Financial Sector After COVID-19 Outbreak
ESAs (EBA, EIOPA, and ESMA) published the first joint report that assesses risks in the financial sector since the outbreak of the COVID-19 pandemic.
BoE Confirms Withdrawal of COVID Corporate Financing Facility
BoE and HM Treasury confirmed that the COVID Corporate Financing Facility (CCFF) will close for new purchases of commercial paper, with effect from March 23, 2021.
ECB Allows Temporary Relief in Leverage Ratio Amid COVID-19 Pandemic
ECB published a decision allowing the euro area banks under its direct supervision to exclude certain central bank exposures from the leverage ratio.
ESAs Launch Survey on Templates for Product Disclosures Under SFDR
ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).
ECB Proposes Integrated Reporting Framework to Reduce Burden for Banks
ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.
EC Deems UK Framework for CCPs Temporarily Equivalent to EMIR Rules
EC adopted a decision determining, for a limited period of time, that the regulatory framework applicable to central counterparties, or CCPs, in the UK and Northern Ireland is equivalent to the requirements laid down in the European Market Infrastructure Regulation (EMIR or Regulation 648/2012).
EBA to Phase Out Guidelines on Loan Repayment Moratoria
EBA has decided to phase out the guidelines on legislative and non-legislative moratoria of loan repayments, in accordance with the earlier specified end of September deadline.
EBA Provides Opinion on Definition of Credit Institution in CRR
EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).
ECB Finalizes Methodology to Assess CCR and A-CVA Risk of Banks
ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.
