ECB’s SESFOD shows mixed conditions in securities financing markets

The European Central Bank (ECB) released the results of the March 2022 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD).

  • Overall credit terms and conditions offered by banks to counterparties tightened slightly from December 2021 to February 2022, mostly ahead of Russia-Ukraine conflict
  • Market participants reported mixed results for financing conditions in securities financing markets, along with slightly deteriorating credit conditions and liquidity in OTC derivatives markets
  • Longer term, market participants reported tighter overall terms and conditions for securities financing and OTC derivatives transactions

The responses contained in the March 2022 summary mainly cover the period preceding the Russian invasion of Ukraine. Therefore, they only reflect the impact of this geopolitical development to a limited degree.

Turning to securities financing transactions, survey responses for financing conditions were mixed. This was reflected in net percentages of participants reporting a slightly higher maximum amount and maximum maturity of funding for most types of euro-denominated collateral, and in slightly increasing rates/spreads for funding against most collateral types. Haircuts applied to euro-denominated collateral had increased slightly or were unchanged for all types of collateral. Respondents reported stronger demand for funding against government bonds, but weaker demand for funding against most other collateral types.

As for non-centrally cleared over-the-counter (OTC) derivatives, respondents reported that initial margin requirements had increased slightly for many types of OTC derivative, and that liquidity and trading had deteriorated for many OTC derivative types over the December 2021 to February 2022 review period.

Overall credit terms and conditions offered by banks to counterparties tightened slightly over the period from December 2021 to February 2022. While price terms became tighter across the board, non-price terms were more restrictive for non-financial corporations only. This tightening continues the trend reported in the previous three quarters and is broadly in line with expectations expressed in the previous survey. Looking ahead, respondents to the March survey expected a further tightening of price and non-price terms for all types of counterparty over the period from March to May 2022.

Read the full report

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