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On balance, credit terms and conditions offered to counterparties tightened for both securities financing and over-the-counter (OTC) derivative transactions over the three-month reference period from June to August 2018. The tightening was in line with the expectations reported in the previous quarter and was explained mainly by the deterioration in the liquidity conditions and functioning of the general collateral market, as well as the lack of intermediaries’ balance sheet capacity.
Banks and dealers have also increased their attention towards the management of concentrated credit exposures, in particular vis-à-vis central counterparties.
As regards the provision of finance collateralised by euro-denominated securities, survey respondents reported that, on balance, the maximum amount of funding, maturity and haircuts had all remained broadly unchanged for most types of collateral. The liquidity and functioning of the market for domestic government bonds slightly improved, following several quarters of deteriorating conditions.
As regards non-centrally cleared OTC derivatives, a small number of respondents reported an increase in initial margin requirements and a deterioration in liquidity and trading conditions. 12% of respondents (in net terms) reported an increase in the posting of non-standard collateral over the three-month reference period.