- Credit terms and conditions tightened slightly for all counterparty types over the review period from December 2022 to February 2023.
- Price and non-price terms tightened for all counterparty types except sovereigns, with banks and dealers experiencing the most tightening.
- The tightening of credit terms and conditions was mainly attributed to a deterioration in general market liquidity and functioning, continuing a trend reported for the previous seven quarters.
- Survey respondents expect overall credit terms to tighten further from March to May 2023.
- In securities financing transactions, respondents reported an increase in the maximum amount and maximum maturity of funding offered against euro-denominated government bonds, while larger haircuts were applied to high-yield corporate bonds, asset-backed securities, and covered bonds.
- Financing rates/spreads had increased for financing secured against all collateral types, and there was higher overall demand for funding with a maturity greater than 30 days.
- Liquidity had continued to deteriorate for all collateral types, especially for high-yield corporate bonds, government bonds, and financial corporate bonds.
- Initial margin requirements for most non-centrally cleared OTC derivatives increased over the review period, and liquidity and trading improved somewhat for foreign exchange and interest rate derivatives but deteriorated for most other types of non-centrally cleared derivatives.
- The March 2023 survey compared credit terms and conditions at the end of February 2023 with those reported in the March 2022 survey round and found that overall terms had tightened for all counterparty types in securities financing and OTC derivatives transactions.
- The SESFOD survey is conducted four times a year and is an important input into the ECB’s financial stability and market functioning analyses.
https://www.ecb.europa.eu/press/pr/date/2023/html/ecb.pr230412~e13d776241.en.html