The European Central Bank published the December 2025 results of its Survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD), showing broadly stable credit terms in late 2025 but expectations of tightening in the first quarter of 2026, particularly for hedge funds. The survey also points to rising demand for secured funding alongside a noticeable increase in financing rates/spreads across most collateral types. Between September and late 2025, price and non-price terms were largely unchanged, with a slight easing in price terms that respondents linked mainly to general market liquidity conditions, competition from other institutions and counterparties’ financial strength; tightening expectations for Q1 2026 were more pronounced for price terms than non-price terms. On secured funding, demand increased across all collateral types, especially for domestic and high-quality government bonds, while financing rates/spreads rose for all collateral except asset-backed securities; maximum amounts and maturities increased for funding secured against debt instruments (excluding convertible securities). For non-centrally cleared OTC derivatives, terms including initial margin requirements were broadly unchanged, but valuation disputes were reported to have increased slightly in volume and duration, particularly for commodity derivatives; respondents also reported improved ability to act as a market-maker in times of stress for derivatives versus 2024, but a deterioration for debt, asset-backed and convertible securities. The ECB also made data from all previous rounds available via the ECB Data Portal and published the detailed series and guidelines on its website; the SESFOD is conducted quarterly and the December 2025 round was based on responses from 26 large banks.
European Central Bank 2026-01-28
European Central Bank releases SESFOD survey signalling expected Q1 2026 tightening of credit terms and higher secured funding spreads
The European Central Bank's December 2025 Survey on credit terms in euro-denominated securities financing and OTC derivatives markets indicates stable credit terms in late 2025, with expectations of tightening in Q1 2026, especially for hedge funds. The survey highlights increased demand for secured funding and rising financing rates/spreads, with unchanged terms for non-centrally cleared OTC derivatives but increased valuation disputes, particularly in commodity derivatives.