ECB survey finds broadly stable credit terms in euro financing markets
The Eurosystem's December 2025 SESFOD survey reported broadly stable credit terms and conditions in euro-denominated securities financing and OTC derivatives markets. A panel of 26 large banks noted a slight net easing, primarily in price terms, for the period between September and November 2025.
Stable terms, tighter outlook
The Eurosystem's December 2025 SESFOD survey revealed that overall credit terms and conditions in euro-denominated securities financing and OTC derivatives markets remained broadly stable between September and November 2025. A panel of 26 large banks reported a slight net easing, primarily driven by price terms, while non-price terms were largely unchanged.
Respondents attributed this easing to general market liquidity conditions, competitive dynamics, and counterparty financial strength.
Looking ahead to the first quarter of 2026, participants anticipate a noticeable tightening in funding conditions, particularly on price terms, with hedge funds expected to be most affected.
The survey also noted limited recent changes in leverage availability, negotiation intensity, and valuation disputes across various counterparty types.
Collateral shifts, market-making concerns
Financing conditions showed mixed developments across collateral types.
Maximum funding amounts increased for government and corporate bonds but declined slightly for equities and convertibles.
Maximum maturities lengthened, while haircuts marginally rose for domestic and high-quality government bonds and equities.
Financing rates and spreads increased across nearly all collateral types, alongside a broad-based rise in demand for funding.
Market-making activity saw moderate changes, with increased activity in debt securities and derivatives.
While banks anticipate increasing market-making in 2026, their ability to act as market-makers in stressed conditions has somewhat weakened for several instruments.
Limited shifts, persistent concerns
The survey highlights a period of relative stability, yet underlying vulnerabilities persist, particularly regarding market-making capacity under stress.
The qualitative nature of the findings, while informative, offers limited quantitative insight into the magnitude of these risks.
This suggests that while no immediate alarm bells are ringing, the financial system's resilience to future shocks remains a nuanced challenge.