ECB Releases Results of December Survey on Credit Terms and Conditions
ECB published results of the December 2019 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets. The survey collected qualitative information on changes between September and November 2019. The survey found that the credit terms offered to counterparties were broadly unchanged during this period, in both the securities financing and the OTC derivatives markets. Price terms were also eased, whereas non-price terms were tightened.
The key drivers underlying the easing of price terms were an improvement in liquidity conditions, competitive pressure, and greater availability of balance sheet capacity. Looking ahead, survey respondents expected terms to remain broadly unchanged over the next three months. However, they reported that over the past three months all counterparty types had intensified their efforts to negotiate more favorable price and non-price terms. Regarding the provision of financing collateralized by euro-denominated securities, the maximum amount of funding offered continued to decline, especially for funding secured with government bonds, asset-backed securities, or high-quality financial and non-financial corporate bonds. The maximum maturity of funding was broadly unchanged and haircuts decreased slightly for some clients. Financing rates/spreads offered remained broadly unchanged for funding secured with all types of collateral except asset-backed securities. Demand for funding strengthened across all types of collateral other than high-yield corporate bonds. For most types of collateral, this follows four consecutive reference periods of falling demand.
For non-centrally cleared OTC derivatives, initial margin requirements increased somewhat. Liquidity and trading improved slightly for credit derivatives. Overall, market-making activities increased for debt securities and decreased for derivatives over the past year. Respondents reported an increase in market-making for the majority of asset types covered by the survey, especially domestic government bonds, asset-backed securities, high-quality non-financial corporate bonds and convertible securities, but not derivatives or high-quality (non-domestic) government bonds. Institutions expected their market-making activities to increase further in 2020, in particular for high-quality financial corporate bonds, domestic government bonds and high-quality non-financial corporate bonds.
ECB also published guidelines and detailed data series related to the survey. The results of the 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 survey 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 Eurosystem conducts a quarterly qualitative survey on credit terms and conditions in euro-denominated securities financing transaction and OTC derivatives markets. The survey questions are grouped into three sections: counterparty types, securities financing, and non-centrally cleared OTC derivatives. In addition, the December 2019 survey included special questions about market-making activities.
Keywords: Europe, EU, Banking, Insurance, Securities, Securities Financing Transactions, OTC Derivatives, Survey Results, Credit Terms and Conditions, Margin Requirements, SESFOD, ECB
Previous ArticleECB Updates Documentation on SHS Reporting by Banks
FINMA Approves Merger of Credit Suisse and UBS
The Swiss Financial Market Supervisory Authority (FINMA) has approved the takeover of Credit Suisse by UBS.
BOE Sets Out Its Thinking on Regulatory Capital and Climate Risks
The Bank of England (BOE) published a working paper that aims to understand the climate-related disclosures of UK financial institutions.
OSFI Finalizes on Climate Risk Guideline, Issues Other Updates
The Office of the Superintendent of Financial Institutions (OSFI) is seeking comments, until May 31, 2023, on the draft guideline on culture and behavior risk, with final guideline expected by the end of 2023.
APRA Assesses Macro-Prudential Policy Settings, Issues Other Updates
The Australian Prudential Regulation Authority (APRA) published an information paper that assesses its macro-prudential policy settings aimed at promoting stability at a systemic level.
BIS Paper Examines Impact of Greenhouse Gas Emissions on Lending
BIS issued a paper that investigates the effect of the greenhouse gas, or GHG, emissions of firms on bank loans using bank–firm matched data of Japanese listed firms from 2006 to 2018.
HMT Mulls Alignment of Ring-Fencing and Resolution Regimes for Banks
The HM Treasury (HMT) is seeking evidence, until May 07, 2023, on practicalities of aligning the ring-fencing and the banking resolution regimes for banks.
MFSA Sets Out Supervisory Priorities, Issues Reporting Updates
The Malta Financial Services Authority (MFSA) outlined its supervisory priorities for 2023
German Regulators Issue Multiple Reporting Updates for Banks
Deutsche Bundesbank published the nationally deactivated validation rules for the German Commercial Code (HGB) users on the taxonomy 3.2, which became valid from December 31, 2022
BCBS Report Examines Impact of Basel III Framework for Banks
The Basel Committee on Banking Supervision (BCBS) published results of the Basel III monitoring exercise based on the June 30, 2022 data.
PRA Consults on Prudential Rules for "Simpler-Regime" Firms
Among the recent regulatory updates from UK authorities, a key development is the first-phase consultation, from the Prudential Regulation Authority (PRA), on simplifications to the prudential framework that would apply to the simpler-regime firms.