Eurosystem

Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets (SESFOD) - March 2024

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Thursday, April 18, 2024
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Survey on credit terms and

Key Points: 
    • Survey on credit terms and
      conditions in euro-denominated
      securities financing and OTC
      derivatives markets (SESFOD)
      March 2024
      The Eurosystem conducts a three-monthly qualitative survey on credit terms and
      conditions in euro-denominated securities financing and over-the-counter (OTC)
      derivatives markets.
    • The survey questions are grouped into three sections:
      1.

      counterparty types ? credit terms and conditions for various counterparty
      types in both securities financing and OTC derivatives markets;

      2.

      securities financing ? financing conditions for various collateral types;

      3.

      non-centrally cleared OTC derivatives ? credit terms and conditions for
      various derivative types.

    • The survey focuses on euro-denominated instruments in securities financing and
      OTC derivatives markets.
    • For securities financing, the survey refers to the
      euro-denominated securities against which financing is provided, rather than the
      currency of the loan.
    • Reporting institutions should report on their global credit terms, so the survey is
      aimed at senior credit officers responsible for maintaining an overview of the
      management of credit risks.
    • SESFOD March 2024

      2

      March 2024 SESFOD results
      (Review period from December 2023 to February 2024)
      The March 2024 Survey on credit terms and conditions in euro-denominated
      securities financing and OTC derivatives markets (SESFOD) reports qualitative
      changes in credit terms between December 2023 and February 2024.

    • Looking at credit terms and conditions for the various types of non-centrally cleared
      OTC derivative, initial margin requirements increased slightly for all derivative types.
    • Survey respondents reported mostly unchanged conditions as regards the maximum
      amount of exposure and the maximum maturity of trades.
    • Moreover, they reported that the volume of valuation disputes had
      declined for all derivative types except credit derivatives.
    • The survey asked respondents to compare credit terms
      and conditions on the cut-off date for the March 2024 survey round (i.e.
    • Compared with the
      previous year, overall terms and conditions for securities financing and OTC
      derivatives transactions had eased somewhat across all counterparties, while credit
      standards for funding secured against various types of collateral and non-price terms
      in OTC derivatives markets were generally tighter.
    • Credit terms and conditions for various counterparty types in both
      securities financing and OTC derivatives markets
      Overall credit terms and conditions eased between December 2023 and
      February 2024 (Chart A).
    • The overall easing of conditions masked some
      heterogeneity between price and non-price terms, and across different types of
      counterparty, though reported changes were relatively small.
    • Credit terms and conditions for various types of non-centrally
      cleared OTC derivative
      Initial margin requirements increased slightly for all derivative types.
    • Meanwhile, they reported
      unchanged conditions for credit derivatives referencing sovereigns and commodities,
      as well as a slight deterioration for credit derivatives referencing corporates and
      structured credit products.
    • The survey asked respondents to compare the credit terms and conditions observed
      on the cut-off date for the March 2024 survey (i.e.
    • Compared with the previous year, overall terms and conditions for securities
      financing and OTC derivatives transactions had eased somewhat across all
      counterparties.
    • Survey respondents reported that non-price credit terms in OTC derivatives
      markets had tightened somewhat for almost all types of derivative relative to
      the previous year.

Digital euro safeguards – protecting financial stability and liquidity in the banking sector

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Thursday, April 18, 2024
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A digital euro would offer a wide range of

Key Points: 
    • A digital euro would offer a wide range of
      financial stability benefits, including safeguarding the role of public money and
      strengthening the strategic autonomy and monetary sovereignty of the euro area in
      the digital era.
    • Keywords: CBDC, digital euro, bank intermediation, financial stability risks.
    • A digital euro has the potential to offer a wide range of financial stability
      benefits for the digital era.
    • A digital euro would
      stimulate financial innovation among private sector entities and enhance the
      efficiency and resilience of the financial system by supporting competition and
      diversity within it.3 In addition, a digital euro would strengthen the strategic autonomy
      and monetary sovereignty of the euro area.
    • A digital euro would be designed to minimise risks to the financial system.
    • 2

      The preparation phase will pave the way for a future decision on whether or not to issue a digital euro.

    • When gauging the implications for the euro area banking sector of introducing a
      digital euro, take-up would be key, as it would determine the level of deposit
      outflows.
    • In the latter case, the
      issuance of a digital euro would not affect banks? balance sheets, since banks would return euro
      banknotes to the Eurosystem in exchange for digital euro.
    • Banknotes and digital euro are two different
      types of central bank liability, so a swap between banknotes and digital euro would only affect the
      composition and not the size of the Eurosystem?s balance sheet.
    • In our analysis, we model only the
      substitution of commercial bank deposits with a possible future digital euro.
    • 8

      The legislative proposal on a digital euro provides for the inclusion of such safeguards and establishes
      specific criteria for the limits, aiming to contain the use of a digital euro as a store of value.

    • ECB Occasional Paper Series No 346

      4

      2

      The added value of digital euro
      safeguards such as holding limits
      To understand the benefits of digital euro safeguards, such as holding limits, it
      is useful to first consider the implications of introducing a CBDC without
      adequate safeguards.

    • (2022), ?Central bank digital currency and bank intermediation: Exploring different
      approaches for assessing the effects of a digital euro on euro area banks?, Occasional Papers, No 293,
      European Central Bank, Frankfurt am Main, May.
    • deciding to adopt the digital euro, and (ii) the average amount of digital euro in a
      wallet.
    • At the same time, as discussed in this paper, the design of a digital euro would
      include effective safeguards, such as individual holding limits, to mitigate
      potential financial stability risks.
    • ECB Occasional Paper Series No 346

      15

      an upper bound on the amount of digital euro in circulation, thereby addressing and
      limiting financial stability concerns associated with the introduction of a digital euro.

    • (2023), ?A digital euro: gauging the
      financial stability implications?, Financial Stability Review, ECB, November.

Denmark joins T2 and TIPS to fully integrate Danish krone in Eurosystem’s payment services

Retrieved on: 
Wednesday, April 3, 2024
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- PRESS RELEASE

Key Points: 
  • - PRESS RELEASE
    Denmark joins T2 and TIPS to fully integrate Danish krone in Eurosystem’s payment services
    21 March 2024
    - ECB and Danmarks Nationalbank sign agreement for Denmark to join T2 and TIPS in April 2025
    - Danish krone to become third currency available for instant payment settlement in TIPS
    The European Central Bank (ECB) and Danmarks Nationalbank today signed an agreement for Denmark to join the ECB’s T2 wholesale payment system and the TARGET Instant Payment Settlement (TIPS) service.
  • Danish financial market participants have started testing both systems in preparation for the launch in April 2025.
  • The inclusion of the Danish krone in the Eurosystem’s payment services will enable market participants in Denmark to use all three TARGET services to settle all payments and securities in their national currency and to benefit from optimised liquidity management.
  • The multicurrency capabilities of TARGET Services were first activated for the T2S platform when Danmarks Nationalbank joined with the Danish krone in October 2018.

The euro as a global currency: a payments perspective

Retrieved on: 
Wednesday, April 3, 2024
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The global role of a currency can be measured in several ways, including by looking at its use in payments.

Key Points: 
  • The global role of a currency can be measured in several ways, including by looking at its use in payments.
  • After March 2023 the share of the euro in total Swift payment messages (i.e.
  • The associated technical changes have altered the ways in which banks make euro payments and manage euro liquidity, resulting in a break in the data on euro‑denominated Swift payment messages.

Philip R. Lane: The banking channel of monetary policy

Retrieved on: 
Friday, February 16, 2024
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for rates, credit growth in deviation from the start of the cycle (t) in p.p.

Key Points: 
    • for rates, credit growth in deviation from the start of the cycle (t) in p.p.
    • Starting months correspond to the month immediately preceding the first hike or explicit announcement of the hike of the cycle.
    • The dotted lines shows counterfactuals for lending rates and lending volumes, taking December 2021 as the last observation and
      projecting volumes conditional on the path of monetary policy rates.
    • The one for lending volumes is based on the BVAR model in Altavilla,
      Giannone, and Lenza (2016).
    • Composite funding costs are a weighted average of deposit rates
      and average monthly bond yields, with outstanding amounts as weights.
    • Right chart shows
      the contributions of the components to the change in the composite bank funding cost
      between December 2021 and November 2023.
    • Latest observations: 8 February 2024 for bond yields; December 2023 for other series.
    • Notes: ?Others? include shares (listed and not listed as well as those issued by investment
      funds), and insurance and pension schemes.
    • Retail

      Specialised

      Universal

      10

      10

      8

      8

      6

      6

      4

      4

      2

      2

      0

      0

      -2

      -2

      -4
      Jan-20 Aug-20 Mar-21 Oct-21 May-22 Dec-22 Jul-23

      -4

      Sources: ECB (iBSI, iMIR) MPC Task Force on Banking Analysis and ECB calculations.

    • Investment refers to the net
      change in property plant and equipment over assets; cash refers to cash and cash
      equivalents over assets.
    • Households
      loans, credit standards and loan demand
      Rubric
      Changes in credit standards for
      loans to households, and
      contributing factors
      (net percentage)

      0

      30

      -40

      20

      Sources: ECB (BSI) and ECB calculations.

    • Low-income households are those in the bottom 20 per cent
      of the income distribution; high-income households are those in the top 20 per cent.

Luis de Guindos: Monetary policy, financial stability and medium-term growth in the euro area

Retrieved on: 
Thursday, February 15, 2024
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Our approach relies on a term structure model of traded headline inflation-linked swap rates, which we assume span core inflation.

Key Points: 
  • Our approach relies on a term structure model of traded headline inflation-linked swap rates, which we assume span core inflation.
  • The model provides estimates of market-based expectations for core inflation, as well as core inflation risk premia, at daily frequency, whereas core inflation expectations from surveys or macroeconomic projections are typically only available monthly or quarterly.

Number of counterfeit euro banknotes remains low in 2023

Retrieved on: 
Sunday, February 4, 2024
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- PRESS RELEASE

Key Points: 
  • - PRESS RELEASE
    Number of counterfeit euro banknotes remains low in 2023
    29 January 2024
    - 467,000 counterfeit euro banknotes withdrawn from circulation in 2023, one of the lowest levels ever in proportion to total banknotes in circulation
    - More than 70% of withdrawn counterfeits were €20 and €50 denominations
    - Euro banknotes remain safe and trusted means of payment
    - Authenticity of euro banknotes can be verified using “feel, look and tilt” method
    Some 467,000 counterfeit euro banknotes were withdrawn from circulation in 2023.
  • There is little likelihood of receiving a counterfeit, as the number of counterfeits remains low in proportion to the number of genuine euro banknotes in circulation.
  • In 2023, just 16 counterfeits were detected per million genuine banknotes in circulation, which is one of the smallest proportions since the introduction of euro banknotes (see the chart below).
  • Chart
    Number of counterfeit euro banknotes detected annually per million genuine notes in circulation
    Although the proportion is very small, the actual number of counterfeits increased compared with 2022, when the number of counterfeits was exceptionally low following the coronavirus (COVID-19) pandemic.