- Slight tightening in credit terms, for all types of counterparties except hedge funds, with expectations for more favorable credit terms over the next quarter
- Credit terms appear to be stabilizing following the significant tightening observed in the past years
- Little change in liquidity and functioning of markets
Survey respondents reported that credit terms offered to almost all counterparties in both securities financing and over-the-counter (OTC) derivatives transactions had tightened slightly between December 2017 and February 2018. The most cited reason for this was the dealers’ lack of balance sheet capacity. Hedge funds were the only counterparty for which credit terms and conditions eased. Over the course of 2017 the degree of tightening of conditions became more moderate compared with the strong tightening phases seen in 2015 and 2016.
In relation to the provision of finance collateralized by euro-denominated securities, survey respondents reported that conditions had been stable on the whole. This also applies to the liquidity and functioning of collateral markets. Amid this stabilization, conditions for the most-favoured clients reportedly improved, while those for average clients appeared to deteriorate slightly in the three-month reference period. This distinction was especially pronounced for haircuts and financing rates/spreads. Lastly, the use of central counterparties was reported to have increased between December 2017 and February 2018, in line with a trend which started in Q4 2013.