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Funding and credit relationships among financial institutions and other large market participants.
A dealer decides how much exposure to accept and on what terms. Conditions can include price, collateral, haircuts, maturity and trading limits. These choices reflect the customer's creditworthiness, the assets involved and the dealer's capacity or risk appetite. Tightening can therefore occur without a higher headline interest rate: a smaller credit limit or shorter permitted term can also constrain financing.
Suppose a fund previously borrowed €9.5 million against €10 million of securities for three months. A dealer later accepts only €9 million for one month. The fund must provide more of its own cash and renew the financing sooner, even if the quoted interest rate is unchanged. This hypothetical illustrates why several contract terms are needed to describe credit conditions.
ECB survey finds easier wholesale credit terms, with financing costs mixed