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.
Keywords: Europe, EU, Banking, Insurance, Securities, Survey Results, OTC Derivatives, Credit Terms and Legal Conditions, Securities Financing Transactions, Margin Requirements, ECB
Previous ArticleESMA Publishes Market Share Figures for Credit Rating Agencies in EU
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.
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.
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
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.
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.
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.
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.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
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.
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.