The European Central Bank (ECB) has released the results of its quarterly survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets.
Responses were collected from a panel of 28 large banks, comprising 14 euro area banks and 14 banks with head offices outside the euro area and are based on data from September and November 2019.
The results show that credit terms offered to counterparties were, on balance, broadly unchanged over the period in both the securities financing market and the OTC derivatives market.
Price terms eased, whereas non-price terms tightened. The easing, according to the ECB, was driven by an improvement in liquidity conditions, competitive pressure and greater availability of balance sheet capacity.
Looking ahead, survey respondents expected terms to remain broadly unchanged over the next three months. However, they reported that over the past three months all counterparty types had intensified their efforts to negotiate more favourable price and non-price terms.
With regard to the provision of financing collateralised by euro-denominated securities, the survey results revealed that the maximum amount of funding offered continued to decline.
This was especially true for funding secured with government bonds, asset-backed securities or high-quality financial and non-financial corporate bonds.
At the same time, the ECB says, the maximum maturity of funding was broadly unchanged, and haircuts decreased slightly for some clients.
Additionally, financing rates/spreads offered remained broadly unchanged for funding secured with all types of collateral except asset-backed securities. Demand for funding strengthened across all types of collateral other than high-yield corporate bonds.
The ECB notes that for most types of collateral, the latest results follow four consecutive survey reference periods of falling demand.
Elsewhere, for non-centrally cleared OTC derivatives, initial margin requirements increased somewhat. Liquidity and trading deteriorated slightly for credit-referencing derivatives.
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