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
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.