The European Central Bank (ECB) released the results of the December 2023 Survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD).
- Credit terms and conditions unchanged while expected to tighten over the period from September to November 2023
- Financing rates and maximum maturity of funding higher
- Market-making activities over the past year higher for many debt securities and derivatives
Overall credit terms and conditions offered to different counterparty types remained on balance unchanged between September and November 2023, contrasting with the expectations of further tightening expressed in the September 2023 survey. Survey respondents expected overall credit terms to tighten over the period from December 2023 to February 2024.
Survey respondents reported an increase in the maximum amount of funding secured against high-quality government bonds for most-favored clients, while the picture was more mixed as regards the maximum amount of funding offered against other euro-denominated collateral types.
Respondents also reported an increase in the maximum maturity of funding secured against government bonds for most-favored clients but few changes as regards the maximum maturity of funding for other collateral types. Haircuts applied to euro-denominated collateral either increased or remained unchanged for almost all types of collateral but decreased for government bonds. Financing rates/spreads increased significantly for funding secured against all types of collateral.
Survey participants reported an increase in the use of central counterparties (CCPs) for securities financing transactions involving collateral in the form of domestic government bonds. They reported an increase in overall demand for funding – particularly funding secured against domestic and high-quality government bonds, high-quality financial corporate bonds as well as equities. The liquidity and functioning of collateral markets deteriorated for almost all collateral types.
As for non-centrally cleared over-the-counter (OTC) derivatives, survey respondents reported that initial margin requirements had increased slightly for all derivative types except credit derivatives, for which they had remained unchanged. Respondents reported almost no changes in liquidity and trading for most derivative types. Some respondents reported that terms in new or renegotiated master agreements had eased as regards acceptable collateral while they had remained unchanged for all other elements.