There was a net loss of seven primary dealers in Europe between June 2021 and January 2022, according to the Association for Financial Markets in Europe’s (Afme) latest government bond data report.
Over this period, there were 13 exits and six entries to Europe’s primary dealer systems, according to Afme’s report. Germany and Poland suffered the most exits with two each. However, while most national systems have seen reductions in the number of primary dealers, since June 2021 the EU primary dealer network has increased by four banks, taking the total number of its dealers to 43. The EU’s arrival as a super-sized issuer for its €800bn NextGenerationEU programme has attracted the attention of banks to compete for its many fee-paying syndication mandates.
Estonia, Austria, the Netherlands, Slovakia, Sweden, Portugal and the UK all lost one primary dealer each. Finland and Ireland also lost one primary dealer, but gained a new one each during this period.
A number of recent high-profile exits from primary dealerships across Europe has reignited the debate on whether this model is sustainable for banks. Primary dealers are financial institutions that have been approved to trade bonds with a sovereign and they are often the only entities who can bid for new issuance of government bonds via auction. In return, banks are rewarded with fee-paying syndications. But the costs of maintaining primary dealerships and competition among banks to vie for syndication mandates has ramped up, particularly since sovereigns increased their borrowing programmes due to Covid-19.
