ECB survey finds fourth quarter of easier credit terms in securities financing

The European Central Bank said on 7 October that large banks had eased overall credit terms slightly for a fourth consecutive quarter in euro-denominated securities financing and over-the-counter derivatives markets. Its September survey covers changes from June through August 2026. The finding matters to institutions that borrow against securities or trade derivatives, although the survey does not measure the prices paid in individual transactions.

Where the ECB found easier credit terms

The ECB collected qualitative responses from 26 large banks, 14 headquartered in the euro area and 12 elsewhere. The easing was mainly in price terms. Non-price terms eased slightly for banks and dealers, tightened slightly for hedge funds and were unchanged for other counterparties. Those differences matter when assessing the headline result: easier overall terms did not mean every condition improved for every type of client.

A small number of respondents cited market liquidity and functioning, competition from other institutions and counterparties’ financial strength as reasons for easier price terms. Banks also reported a slight increase in hedge funds’ use of leverage. The volume and duration of counterparty valuation disputes were unchanged over the survey period.

Equity-backed funding demand rose, but spreads also increased

Demand for funding secured against most types of collateral increased, led by equities. For equity collateral, the ECB reported a net 27% of respondents indicating higher demand. That is a balance of survey responses, rather than a 27% increase in the amount borrowed. It shows how widely respondents reported a change, without establishing the size of the change in market transactions.

Banks reported only slight, mixed changes in their use of central counterparties. They also described a slight deterioration in liquidity and market functioning for equities and several types of corporate bonds. Those findings qualify the broader picture of easing: the survey records changes across several terms and market segments, rather than a single borrowing rate.

What changed in derivatives markets

For over-the-counter derivatives that were not centrally cleared, initial margin requirements declined slightly for foreign exchange, interest rate, equity and several credit derivative types. Maximum exposures and maturities were broadly unchanged. The ECB reported worse liquidity and trading conditions for equity and commodity derivatives, but a slight improvement for derivatives referencing sovereign credit.

Valuation disputes increased for several derivative types, particularly credit derivatives. That differs from the survey’s unchanged overall volume and duration of counterparty valuation disputes across the wider set of transactions. The ECB’s results therefore point to particular areas of friction within derivatives even as its measure of overall credit terms eased.

How separate market evidence compares

A separate Federal Reserve survey covered US dollar-denominated dealer financing and derivatives over the same June-to-August period. Its 17 participating institutions account for nearly all dealer financing of dollar-denominated securities to nondealers, according to the Fed. Respondents described financing terms as basically unchanged on net across nearly all collateral types, while more than one-fifth reported wider spreads for equity financing.

The Fed survey nevertheless recorded stronger demand in some areas: more than one-third of dealers reported increased demand for equity funding, and nearly one-third reported increased demand for funding against commercial mortgage-backed securities. Its dollar-market findings offer context for the ECB results, but the two surveys cover different currencies and dealer groups. Their responses should not be combined into one measure of global credit conditions.

Securities Finance Times reported, citing S&P Global Market Intelligence data, that global securities-lending revenue reached $1.74 billion in September, up 23% from a year earlier. Third-quarter revenue rose 20% to $5.35 billion. The report said average lending balances increased 33% and utilisation 11% during the quarter, while average fees fell 9%. Asian equities were the largest regional growth driver, with revenue up 90% in the quarter.

What remains uncertain after the survey

The global lending figures describe activity and revenue, not the terms offered by the ECB survey’s banks. Together, the sources show increased activity in parts of securities lending and reported easing in euro-denominated credit terms, but they do not establish what any particular borrower paid or whether market stability changed. Respondents to the ECB survey expected overall terms to ease slightly over the following three months; that was a forecast, not a confirmed outcome.