Results of the September 2026 survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets (SESFOD)

The September 2026 survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets revealed a period of uncertainty influenced by the Middle East conflict and volatile energy prices. The European Central Bank had increased its key interest rates by 25 basis points in June, maintaining them steady in July.

Across all counterparty types, credit terms and conditions eased slightly, with non-price terms showing minor easing for banks and dealers, while tightening slightly for hedge funds and remaining unchanged for other counterparty types. A small number of respondents attributed the eased price terms to general market liquidity, functioning, competition, and counterparty financial strength.

Respondents anticipated a further slight overall easing for all counterparty types in the following three months. Hedge funds increased their leverage usage. Counterparty valuation disputes remained unchanged regarding volume and persistence.

The demand for funding secured against various collateral types surged, primarily driven by equities (cited by 27% of respondents), as per Chart 2. Financing rates/spreads rose for most-favored clients across all collateral types, while increases were limited to specific categories for average clients. Haircuts decreased for most bond collateral types and asset-backed securities, with increased maximum amounts and maturities for some collateral types.

Central counterparties experienced minor and mixed changes. Liquidity and market functioning slightly worsened for equities and several corporate bonds, while the volume and duration of collateral valuation disputes remained unchanged.

Initial margin requirements for non-centrally cleared OTC derivatives decreased slightly for foreign exchange, interest rate, equity, and several credit derivative types. Maximum exposures and trade maturities remained broadly unchanged. Liquidity and trading deteriorated for equity and commodity derivatives but improved for credit derivatives referencing sovereigns.

The volume and duration of valuation disputes in valuation disputes increased for certain derivative types, notably credit derivatives. Some terms in master agreements eased slightly, while non-standard collateral posting remained unchanged.

The September 2026 SESFOD survey, comprising responses from 26 large banks (14 euro area and 12 outside), gathered qualitative information on credit term and condition changes between June and August 2026. The survey, conducted quarterly, covered changes over three-month reference periods ending in February, May, August, and November. Results, detailed data series, and guidelines are available on the ECB’s website, along with all SESFOD publications.