Featured Product

    ECB Issues Results of September Survey on Credit Terms and Conditions

    October 29, 2021

    The European Central Bank (ECB) published the results of the September 2021 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD). The overall credit terms and conditions tightened slightly in both securities financing and over-the-counter (OTC) derivatives markets over the June 2021 to August 2021 review period. Survey respondents reported a tightening of overall credit terms for all counterparty types. Both price and non-price terms tightened somewhat for all counterparty types, and in particular for investment funds, hedge funds and insurance companies.

    The September 2021 survey included special questions aimed at determining the main purposes for which counterparties use OTC derivatives and securities financing transactions. Counterparties use OTC derivatives for a variety of purposes, depending on counterparty type, but they use securities financing transactions mainly for yield enhancement. While non-financial corporations, sovereigns, and bank and dealers use OTC derivatives almost exclusively for hedging purposes, hedge funds use them predominantly for speculation. For counterparties that use OTC derivatives for yield enhancement and/or speculation, interest rate derivatives are the instrument of choice, while for counterparties that use securities financing transactions for yield enhancement and/or speculation, high-quality government, sub-national and supra-national bonds are preferred. Respondents attributed the less favorable price terms mainly to a general deterioration in market liquidity and functioning, a decreased willingness of institutions to take on risk, and internal treasury charges for funding. They attributed the less favorable non-price terms mainly to a decreased willingness of institutions to take on risk, greater competition from other institutions, a general deterioration in market liquidity and functioning, and a reduced availability of balance sheet or capital. 

    With regard to securities financing transactions, respondents reported an ongoing easing of credit terms in securities financing markets across most collateral types, with increased maximum amounts of funding, increased maximum maturity of funding, decreased haircuts to collateral and, most notably, a continued decrease in financing rates/spreads for funding against almost all collateral types. Demand continued to weaken for funding against almost all collateral types, but in particular against government bonds and asset-backed securities. With regard to non-centrally cleared derivatives markets, respondents reported increased initial margin requirements for OTC derivatives, while liquidity and trading was broadly unchanged for the most part. Valuation disputes showed a moderate increase in volume as well as in duration and persistence. The SESFOD 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 September 2021 survey collected qualitative information on changes between June 2021 and August 2021. The results 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.

     

    Related Links

    Keywords: Europe, EU, Banking, Insurance, Securities, SESFOD, OTC Derivatives, Credit Risk, Margin Requirements, Securities Financing Transactions, Credit Terms and Conditions, Lending, ECB

    Related Articles
    News

    EC Regulation Sets Out Methods for Measuring K-Factors Under IFR

    The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.

    January 11, 2022 WebPage Regulatory News
    News

    BIS Studies How Platform Models Impact Financial Stability & Inclusion

    The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.

    January 10, 2022 WebPage Regulatory News
    News

    ESAs Publish List of Financial Conglomerates for 2021

    The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.

    January 07, 2022 WebPage Regulatory News
    News

    APRA Licenses Two More Banks, Reduces Committed Liquidity Facility

    The Australian Prudential Regulation Authority (APRA) granted license to Barclays Bank PLC and Crédit Agricole Corporate and Investment Bank to operate as foreign authorized deposit-taking institutions under the Banking Act 1959.

    January 06, 2022 WebPage Regulatory News
    News

    EU Issues SII Corrigendum; EIOPA Assesses SII Reporting Exemptions

    EU published, in the Official Journal of the European Union, a corrigendum to the Delegated Regulation 2015/35, which supplements Solvency II Directive (2009/138/EC).

    January 06, 2022 WebPage Regulatory News
    News

    EBA Opines on Impact of De-Risking and Associated AML/CFT Challenges

    The European Banking Authority (EBA) published an Opinion on the scale and impact of de-risking in European Union and the steps that competent authorities should take to tackle unwarranted de-risking.

    January 05, 2022 WebPage Regulatory News
    News

    French Financial Markets Authority Sets Out Priorities for 2022

    The French Financial Markets Authority (AMF) published its 2022 work priorities, along with the supervisory priorities for 2022.

    January 05, 2022 WebPage Regulatory News
    News

    US Agencies Issue Statement on Community Bank Leverage Ratio Framework

    The U.S. Department of the Treasury issued a determination on a request for an exemption, by RBC US Group Holdings LLC, from certain requirements of the rule implementing the qualified financial contracts (QFC) recordkeeping requirements under the Dodd-Frank Act.

    January 04, 2022 WebPage Regulatory News
    News

    FCA Informs About Changes to LIBOR Settings From End-2021

    The Financial Conduct Authority (FCA) announced that publication of 24 LIBOR settings has ended and that, going forward, the 6 most widely used sterling and Japanese yen settings will be published using a changed methodology.

    January 04, 2022 WebPage Regulatory News
    News

    PBC Sets Out Fintech Development Plan for 2022 to 2025

    The People’s Bank of China (PBC) formulated the recently issued Fintech Development Plan (2022 to 2025) under the Outline of the 14th Five-Year Plan (2021-2025) for National Economic and Social Development and the Long-Range Objectives through the Year 2035.

    January 04, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 7854