The September 2026 Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets, published Wednesday, covered June to August from a panel of 26 large banks (14 euro area, 12 non-euro area). Overall credit terms eased slightly for all counterparty types, the fourth straight round of slight easing, with the move concentrated in price terms and most pronounced for banks and dealers (a net 8 percent reported easier terms). Non-price terms were unchanged except a slight tightening for hedge funds. Respondents expect further slight easing over the September-to-November period.
The details cut both ways. Hedge funds’ use of financial leverage increased slightly while unutilized leverage availability was unchanged. Haircuts decreased across most bond collateral types and asset-backed securities, and maximum funding amounts and maturities increased for several collateral types, partly reversing the previous round’s tightening. But financing rates and spreads kept rising, liquidity and market functioning deteriorated slightly for equities and corporate bonds, and valuation disputes increased for foreign exchange and credit derivatives, notably. The review period covered the ECB’s June hike and the July hold, against elevated uncertainty from the Middle East conflict and energy-price volatility.
For the ECB, the survey is a transmission puzzle. Policy rates are at 2.50 percent and rising, yet credit conditions as banks report them keep easing on price, leverage is creeping up in the hedge-fund corner, and the October 29 decision must weigh whether financial conditions are actually restrictive enough to bring inflation down.