ECB欧洲央行-Survey-on-credit-terms-and-conditions-in-euro-denominated-securities-financing-and-OTC-derivatives-markets-_SESFOD_-–-September-2019_32页_1mb

Summary of the September 2019 SESFOD Survey

Core Purpose and Scope

The September 2019 Survey on Credit Terms and Conditions in Euro-denominated Securities Financing and OTC Derivatives Markets (SESFOD) is a quarterly qualitative survey conducted by the Eurosystem to monitor credit terms and conditions in targeted wholesale markets. It is part of an international initiative aimed at understanding trends and drivers in credit terms, which is essential for financial stability, market functioning, and monetary policy.

The survey focuses on euro-denominated instruments in securities financing and OTC derivatives markets, with participants being large banks and dealers. Credit terms are reported from the perspective of the firm as a supplier of credit to customers.

Key Findings

Overall Credit Terms

• Credit terms and conditions for counterparties remained broadly unchanged between June and August 2019.
• However, price terms for sovereigns and insurance companies tightened, while non-price terms for banks, dealers, and investment funds tightened.
• The main drivers for tightening were deterioration in liquidity conditions and financial strength of counterparties.
• A small net percentage of respondents expected overall terms to ease for most counterparty types over the next three months.
• Hedge funds were the only exception, with a small net percentage expecting less favourable terms.

Securities Financing

• Maximum funding amounts and maturities declined, especially for government bonds and equities.
• Financing rates/spreads decreased for most collateral types, with a notable decline for convertible securities, high-quality financial and non-financial corporate bonds.
• Haircuts remained largely unchanged, with some exceptions for asset-backed securities and high-quality financial corporate bonds.
• Collateral valuation disputes remained unchanged in volume, persistence, and duration.
• Liquidity in collateral markets improved slightly for corporate bonds, some government bonds, and covered bonds.

Non-centrally Cleared OTC Derivatives

• Initial margin requirements increased somewhat.
• Credit limits remained broadly unchanged.
• Liquidity and trading conditions deteriorated slightly for interest rate, equity, and foreign exchange derivatives.
• Valuation disputes remained unchanged in volume.
• Non-price terms in new or renegotiated master agreements tightened, with less favourable margin call practices and documentation features reported.
• Some respondents noted easing of acceptable collateral requirements and more favourable recognition of portfolio benefits, covenants, and triggers.

Counterparty-Specific Trends

Banks and Dealers

• Price terms remained largely unchanged, with a small tightening.
• Non-price terms tightened slightly.
• The main reason for tightening was deterioration in general market liquidity and functioning.

Hedge Funds

• Price and non-price terms remained largely unchanged.
• The only reported easing was in non-price terms, attributed to general market liquidity and functioning.

Insurance Companies

• Price terms tightened.
• Non-price terms remained unchanged.
• Tightening was attributed to deterioration in financial strength of counterparties.

Investment Funds (incl. ETFs), Pension Plans, etc.

• Price terms tightened.
• Non-price terms tightened slightly.
• The main reason for tightening was deterioration in financial strength of counterparties.

Non-financial Corporations

• Price terms remained unchanged.
• Non-price terms tightened slightly.
• Tightening was attributed to deterioration in financial strength of counterparties.

Sovereigns

• Price terms tightened.
• Non-price terms tightened slightly.
• Tightening was attributed to deterioration in financial strength of counterparties.

Expectations for the Future

• A small net percentage of respondents expected overall terms to ease for most counterparty types over the next three months.
• Banks and dealers and investment funds showed the strongest expectations of more favourable terms.
• Non-financial corporations were the only group where expectations were for less favourable terms.

Additional Observations

• CCPs did not influence credit terms significantly.
• Attention to concentrated credit exposures increased further.
• Financial leverage decreased for hedge funds, but not for insurance companies or investment funds.
• Pressure from clients to obtain more favourable terms increased, with hedge funds being the only exception.

Conclusion

The September 2019 SESFOD survey highlights a mixed trend in credit terms and conditions across different counterparty types. While overall terms remained stable, price terms for sovereigns and insurance companies tightened, and non-price terms for banks, dealers, and investment funds tightened. These changes were primarily driven by deterioration in liquidity and financial strength of counterparties. Looking ahead, there was a slight expectation of easing for most counterparty types, with the exception of non-financial corporations. The survey underscores the importance of monitoring credit risk and market dynamics in the context of financial stability and policy-making.