30 April 2013

New ECB survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets

Selected main findings of the March 2013 survey are presented below.

Responses suggested that offered price terms (such as financing spreads) had remained basically unchanged, on balance, for the important types of counterparties covered in the survey over the three-month period ending in February 2013. Nevertheless, modest net shares of respondents reported easier price terms for large banks and dealers, insurance companies and investment funds, pension plans and other institutional investment pools. In the case of non-price terms (including, for example, the maximum amount of funding, haircuts, covenants and triggers and other documentation features), the net fractions of banks that reported tightening were small and also smaller than in the previous December 2012 survey.

Slight increases in the use, and in the availability, of additional financial leverage under agreements currently in place with hedge fund clients were reported by one-quarter and one-tenth of respondents respectively.

With a few exceptions, and amid some improvement in market liquidity and functioning, respondents indicated that the financing rates/spreads at which securities are funded had decreased, on balance, for the various collateral types covered in the survey, but especially so for euro-denominated government bonds, high-quality financial and non-financial corporate bonds, and covered bonds.

About one-fifth of respondents indicated that demand for the funding of euro-denominated government bonds and asset-backed securities had increased, on balance, while less marked, but nevertheless across-the-board, increases were also reported for other collateral types. Furthermore, the net shares of banks reporting an increased demand for funding were larger than in the December 2012 survey for all types of collateral covered. In addition, for many types of collateral, the net percentages of banks that reported higher demand for funding were larger for maturities greater than 30 days.

Except for convertible securities and equities, the respondents reported an improvement in liquidity and market functioning for the various types of collateral included in the survey over the three-month reference period. Between one-fifth and one-third of banks indicated an improvement, on balance, for euro-denominated government bonds and high-quality corporate bonds.

For most types of non-centrally cleared derivatives contracts included in the survey, banks reported that their liquidity and trading had, on balance, slightly deteriorated over the three-month reference period. This deterioration was, however, less pronounced than in the December 2012 survey.

Responses to the special questions on the current stringency of credit terms relative to the end of 2006 were broadly uniform, with the majority of respondents indicating that current credit terms applicable to the main types of counterparties, collateral and OTC derivatives covered in the survey were tighter, often considerably so, than at the end of 2006.

Press release

Survey results

© ECB - European Central Bank