The European Central Bank published the results of its March 2025 Survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives (SESFOD), covering changes between December 2024 and February 2025. Respondents reported that overall price and non-price credit terms and conditions remained largely unchanged, with no net change in price terms and only a very minor net tightening in non-price terms; for the second quarter of 2025, 88% of respondents expected no overall changes. Across collateral types used in securities financing, haircuts decreased in net terms for nearly all asset classes, with no net changes reported only for high-quality government, sub-national and supra-national bonds. Haircuts on funding secured against high-quality corporate bonds recorded notable declines, including a net 20% of respondents reporting lower haircuts on high-quality financial corporate bonds. Financing rates and spreads also shifted from a three-year pattern of net increases, with net decreases reported across all collateral types except equities; for corporate bonds, asset-backed securities and covered bonds, respondents recorded a net decrease for the first time since 2021. Demand for funding secured against domestic government bonds fell in net terms for the first time in more than three years. For non-centrally cleared OTC derivatives, initial margin requirements, credit limits and liquidity were reported as largely unchanged, while the duration and persistence of valuation disputes decreased somewhat. Special questions comparing end-February 2025 with the March 2024 survey pointed to overall terms and conditions for securities financing and OTC derivatives transactions remaining broadly stable year on year, with a slight skew towards tightening across counterparties. Respondents reported minor tightening for secured funding of equities and convertible securities and very slight easing for non-domestic government bonds. The survey is based on qualitative responses from 27 large banks and notes that responses were collected in the first quarter of 2025, meaning they do not reflect market turmoil observed in April.
European Central Bank 2025-05-02
European Central Bank survey finds credit terms broadly unchanged while haircuts and financing spreads fall across most collateral
The European Central Bank's March 2025 Survey showed largely unchanged credit terms from December 2024 to February 2025, with 88% expecting no changes in Q2. Haircuts decreased for most assets, notably high-quality corporate bonds, while financing rates and spreads decreased except for equities. Initial margin requirements and credit limits for non-centrally cleared OTC derivatives remained stable, with minor tightening for secured funding of equities and convertible securities.