The European Central Bank published the results of the September 2022 Survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD).
- Tighter credit terms and conditions offered by banks to counterparties, mainly attributed to deterioration in general market liquidity and functioning
- Higher maximum amount of funding but shorter maximum maturity against domestic government bonds
- Deterioration in liquidity conditions continued for most collateral types
- Higher initial margin requirements for most OTC derivative types, especially commodity derivatives
In the case of securities financing transactions, the maximum amount of funding offered against collateral in the form of euro-denominated domestic government bonds increased, while the maximum maturity offered decreased. For other types of collateral, respondents reported a mixed picture. Haircuts applied to euro-denominated collateral either increased or remained unchanged, while financing rates/spreads increased for financing secured against all collateral types. The liquidity of most collateral types continued to deteriorate, with the largest percentage of respondents reporting a decrease in the liquidity of high-yield corporate bonds.
On balance, overall credit terms and conditions tightened over the June-August 2022 review period across all counterparty types. Price terms tightened for all counterparty types, but in particular for banks and dealers, investment funds and hedge funds. Non-price terms tightened for hedge funds and banks and dealers. The overall tightening of credit terms and conditions − mainly attributed to a deterioration in general market liquidity and functioning − continued the trend reported for the previous five quarters and was in line with the expectations expressed in the June 2022 survey.
Overall credit terms are expected to tighten further over the September-November 2022 review period. The amount of resources dedicated to managing concentrated credit exposures increased in the June-August 2022 review period, while the use of financial leverage and the availability of unutilised leverage decreased.