The European Central Bank releases its results of the March 2024 Survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD), which showed that credit terms and conditions easing over the period from December 2023 to February 2024.
In addition, there were increases in the maximum amount of funding, the maximum maturity of funding and demand for funding across many types of collateral, as well as increased resources dedicated to managing concentrated credit exposures to banks and dealers.
Overall credit terms and conditions eased for most counterparty types between December 2023 and February 2024, an outcome which contrasted with the expectations of further tightening that had been expressed in the December 2023 survey. Price terms eased more than non-price terms overall. Respondents mainly attributed the easing of price terms to an improvement in general market liquidity and improvements in the current or expected financial strength of counterparties.
Many collateral types saw significant percentages of respondents report increases in the maximum amount and the maximum maturity of funding. Increased haircuts were applied to convertible securities – and, to a lesser extent, equities, high-quality corporate bonds and covered bonds.
Financing rates/spreads increased for funding secured against all types of collateral except covered bonds, with the most significant increases being observed for funding secured against government bonds, equities and convertible securities. Many collateral types also saw significant percentages of respondents report increases in overall demand for funding and demand for funding with a maturity greater than 30 days – particularly government bonds, high-quality corporate bonds, covered bonds and equities. Respondents reported mixed results as regards the liquidity and functioning of collateral markets. The volume, duration and persistence of valuation disputes declined somewhat for individual collateral types.
The ECB included a number of special questions in the March 2024 survey in order to look at longer‑term trends. The survey asked respondents to compare credit terms and conditions on the cut‑off date for the March 2024 survey round (i.e. at the end of February 2024) with those reported in the March 2023 survey. Compared with the previous year, overall terms and conditions for securities financing and OTC derivatives transactions had eased somewhat across all counterparties, while credit standards for funding secured against various types of collateral and non-price terms in OTC derivatives markets were generally tighter.