On May 2, 2025, the European Central Bank (ECB) released the results of the March 2025 Survey on Credit Terms and Conditions in Euro-Denominated Securities Financing and OTC Derivatives Markets (SESFOD). The survey, which covers changes in credit terms and conditions over the period from December 2024 to February 2025, highlights several trends in financing rates, spreads, and collateral conditions across various asset classes.
Stable Credit Terms with Minor Adjustments
Overall, credit terms and conditions remained largely stable between December 2024 and February 2025. Respondents reported no net change in price terms, while non-price terms showed a very slight net tightening. Looking ahead to the second quarter of 2025, most survey respondents (88%) expect no significant changes in credit terms. However, some expect a minor tightening in credit conditions.
Decreased Financing Rates and Haircuts Across Asset Classes
The survey revealed a notable decrease in haircuts for funding secured against most types of collateral, with the exception of high-quality government, sub-national, and supra-national bonds. Notably, the largest decreases were observed in haircuts for high-quality corporate bonds, both financial and non-financial. Additionally, financing rates and spreads reversed a long-standing upward trend across nearly all asset classes, except equities. For the first time since 2021, a net decrease in financing rates was observed for corporate bonds, asset-backed securities, and covered bonds.
Decreased Demand for Funding Secured Against Government Bonds
For the first time in over three years, demand for funding secured against government bonds saw a net decrease. This shift marked a significant change in the funding landscape, reflecting evolving market conditions.
No Major Changes in OTC Derivatives
In the non-centrally cleared OTC derivatives market, credit terms such as initial margin requirements, credit limits, and liquidity remained mostly unchanged. However, respondents noted a reduction in the duration and persistence of valuation disputes across all types of derivatives, signaling improvements in the resolution of these issues.
Long-Term Trends
The ECB also included special questions in the March 2025 survey to assess longer-term trends. Compared to March 2024, credit terms for securities financing and OTC derivatives transactions remained largely unchanged. There was a slight tightening in credit terms for secured funding of equities and convertible securities, while a minor easing was observed for non-domestic government bonds.
Conclusion
The results of the March 2025 SESFOD survey indicate a stable environment for credit terms and conditions, with minor adjustments in certain areas. The decreased demand for government bond-backed funding and reductions in financing rates across asset classes are notable trends, reflecting broader shifts in market conditions. The next SESFOD survey, scheduled for the second quarter of 2025, will continue to monitor these developments.
The full results, detailed data series, and SESFOD guidelines are available on the ECB’s website, along with all other SESFOD publications.
The SESFOD survey is conducted quarterly and provides insights into changes in credit terms and conditions across a three-month reference period. The March 2025 survey reflects responses from 27 large banks, including both euro area and non-euro area banks.
