Commenting on the UK FCA and Bank of England consultations on the regulatory approach to stablecoins, which close today, James Kemp, Managing Director of Technology and Operations at the Association for Financial Markets in Europe (AFME), said: “The UK’s plan to bring stablecoins into the regulatory perimeter is a positive step towards creating a safe and sound system for cryptoassets, and towards promoting confidence in DLT-based capital markets. However, AFME has concerns around the proposed design of a number of the rules, which in their current form will have negative consequences for wholesale markets and participants. “The FCA discussion paper goes beyond just regulating stablecoins, as it proposes enhanced rules in the custody of other types of cryptoassets, including those that currently meet the definition of specified investments. These instruments, which include security tokens, are inherently securities and should be treated as such throughout their lifecycle. To preserve market functioning, it is important that they are not subject to the separate regulatory treatment and territorial scope for custody proposed by the FCA. “AFME is greatly concerned that the proposed custody rules would undermine the status quo for the provision of custody services, especially in wholesale markets. We therefore urge the UK Treasury and FCA to reconsider their proposals: changes are needed to enable UK wholesale institutions to optimally access and provide custody services in the growing markets of security tokens. Without such changes, the proposals would negatively impact UK investors’ market access, hamper the UK’s role as a fintech hub and challenge the growth of DLT-based capital markets in the UK.” Specifically, AFME suggests: The territorial scope of regulated custody activities should not deviate from current market practice. We disagree with the proposed expanded territorial scope to capture relevant cryptoasset activities undertaken from outside of the UK. This proposed treatment would represent a significant departure from the way the territorial scope for regulated financial services activities (including the custody of security tokens) is currently determined under the UK framework. Cryptoassets qualifying as specified investments (including security tokens) should be treated as such throughout the regulatory framework and not be subject to a proposed separate regime for custody. The FCA’s approach to regulating the custody of cryptoassets should distinguish between the custody of cryptoassets qualifying as specified investments (including security tokens) and the custody of other cryptoassets (including stablecoins). Existing FCA rules should be maintained for the custody of cryptoassets that meet the definition of specified investments (including security tokens) and tokenised deposits. To facilitate and incentivise the issuance of regulated stablecoins, the criteria for FCA-regulated and BoE-regulated stablecoins should not be overly restrictive. We view that the criteria for backing assets should be broadened beyond short-term government bonds and cash-deposits for FCA-regulated stablecoins and central bank deposits for BoE-regulated systemic stablecoins and should at a at a minimum include high-quality liquid assets. It is imperative that wholesale financial institutions should be able to easily access and use overseas issued stablecoins (e.g. USDC). We believe that the FCA should reconsider the proposed requirement for a UK payment arranger in relation to wholesale payment chains or at a minimum delay its implementation until international frameworks and markets mature. - ENDS - Notes to Editors: Background: As part of the future financial services regulatory regime for cryptoassets, the UK Government has announced a phased regulatory approach to regulating the new asset classes, with: Phase 1 focused on fiat-backed stablecoins issuance and custody, followed by Phase 2 on the regulation of broader cryptoasset regime. HM Treasury will lay down secondary legislation to implement the framework for regulating both categories of assets and delegate rulemaking powers to the regulators (FCA and Bank of England). The discussion papers from the FCA and Bank of England on stablecoins set out the regulators’ initial Phase 1 proposals. Should they decide to proceed with rulemaking, they have committed to consulting on any final rules through a subsequent call for feedback. AFME has been heavily engaged with the UK’s future financial services regulatory regime for cryptoassets. In 2023, AFME responded to the HM Treasury’s consultation on the regime. AFME intends to engage with UK policymakers throughout the design and implementation of the regime. - ENDS -

Following the provisional agreement reached by the European Council and Parliament on the EU Listing Act yesterday, Gary Simmons, Managing Director of Equity Capital Markets at the Association for Financial Markets in Europe (AFME), said: “Yesterday’s political agreement on the EU Listing Act is a promising first step towards increasing Europe’s attractiveness as a desirable location for companies to list. “And while this is a step in the right direction, the proposals are not perfect. AFME has some concerns about certain elements, including prescriptive page limits. Arbitrary page limits on prospectuses and other disclosure documents’ length will not only potentially increase litigation risks for issuers, controlling shareholders, directors and underwriters, but may also result in risk for investors in not being completely sure that they are being given all of the necessary information to make an investment decision. This may encourage listings outside of the EU, where no such disclosure limitations are imposed and where jurisdictions may be seen as more flexible alternatives, especially for more complex transactions. “In light of the dwindling number of EU Initial Public Offerings, the Listing Act alone will not be enough to ensure that the EU is the best place for corporates to go public. In this respect, work is still needed to boost Europe’s equity market liquidity. “To do this, progress on a meaningful consolidated tape is required, which will provide a single window into investment opportunities across Europe for all investors, democratised regardless of their location or sophistication. While the EU has reviewed its jurisdictionally unusual rules of ringfencing EU investors to certain venues and of capping their trading volumes via certain trading mechanisms, the incoming improvements still leave these rules out of sync with the regulatory frameworks of competing regions. “Europe is at an important juncture to establish itself as a leading equity market. The opportunity to address some structural issues and revise key capital-market regulations, which govern how markets function in the EU, rests with policymakers. “We look forward to continuing discussions and engagements with policymakers as these proposals are implemented in the market.” - ENDS -

Commenting on the latest set of Digital Operational Resilience Act (DORA) publications, published today by the European Supervisory Authorities and outlining the ambitious timeframe for implementation, James Kemp, Managing Director at the Association for Financial Markets in Europe (AFME), said: “There is now only a year until the application of DORA – the EU’s milestone Digital Operational Resilience Act, which has unprecedented and far-reaching requirements. DORA is intended to harmonise risk management frameworks for ICT services and banks have until January next year to ensure they and their suppliers are compliant. “This ambitious 12-month window until implementation is a particular concern because many of the incoming risk management practices are having to be set up manually from scratch, due to authorities’ failure to leverage existing policies and frameworks (for example the ICT Risk Management Guidelines and EBA Outsourcing Guidelines). The pace and scale of the challenge associated with implementation should not be underestimated. This latest set of technical standards will regretfully exacerbate the challenge facing banks and financial entities in taking forward those preparations. “In particular, AFME is concerned that without a proportionate and phased approach to enforcement, the obligations on supplier contracts will cause major disruption. The idea that banks can renegotiate all their third-party contracts within 12 months is unrealistic, especially when many of these contracts are group-wide global arrangements with providers who are themselves not based within the EU. Between now and January 2025, AFME strongly encourages the EU authorities to engage with industry on how firms should be rationalising these requirements. We recommend this be done on a forward-looking basis upon contract renewal. “Proportionality is similarly required on the establishment of the incoming Registers of Information. It is positive that the ESAs have made changes in their final advice to certain problematic earlier proposals, for example dropping the requirement that firms update registers on an ongoing basis and limiting certain reporting requirements to critical or important functions only. Nevertheless, the use of new data fields and formats will impede firms in efficiently pulling data from those registers already in existence. “Ultimately, the Digital Operational Resilience Act was designed to bolster the resilience of the financial system with a special focus on the growing importance of third-party providers in the digital age. It would be self-defeating if the implementation of this milestone regulation, which has the support of industry in principle, caused disruption.” Specifically AFME suggests: Applying the policy for ICT Suppliers on a forward-looking basis: the incoming policy, and related contractual requirements, should be applied only on a forward-looking basis with financial entities permitted to implement the new requirements upon contract renewal, rather than necessitating off-cycle remediation. At the very least, banks should be permitted to prioritise their material contractors, rather than seeking to capture the whole supply chain in a single year. Removing the overlap with existing EBA Outsourcing Guidelines: AFME calls on the ESA’s to address the overlap between the two sets of guidelines as a priority and to allow firms to demonstrate their DORA compliance through the existing practices and structures where possible. Embedding the proportionate approach to the Register of Information: AFME urges the supervisors to build on the amendments within the final report, by focusing their information requests on material outsourcing arrangements, at least in the first year of the Register. We also welcome the decision to remove certain new concepts such as an ICT service identifier. Safeguarding the harmonised Incident Reporting framework: AFME flags the harmonisation objectives of DORA are being fragmented before they even come into practice, thanks to the plethora of horizontal regulatory proposals being taken forward by other parts of the Commission. DG-FISMA must take a more proactive stance in safeguarding the DORA framework from overlapping and inconsistent proposals, particularly the incoming Cyber Resilience Act, which is causing growing alarm amongst industry through its duplicative approach. - ENDS -

Following the conclusion of trilogues on 29 June 2023, and confirmation of final compromise texts by the EU Council on 18 October 2023, the European Parliament has today voted on the latest amendments to the Markets in Financial Instruments Directive/Regulation (MiFID/MiFIR) in its plenary session. Adam Farkas, CEO of the Association for Financial Markets in Europe (AFME), issued the following comment in response: “As the 2019-2024 EU legislative cycle concludes, new and pressing challenges have emerged including strained public finances, demographic shifts and an estimated annual transition investment of EUR 700 billion. This context underscores the importance of developing open, deep, and integrated capital markets to support EU corporates and citizens. “Despite efforts under the EU’s Capital Markets Union (CMU) Action Plans, EU capital markets remain underdeveloped in comparison to the size of the EU economy and the EU’s global counterparts. Financial integration is lower than before the financial crisis, EU bond and securitisation markets are three times smaller than in the US, EU equity issuance remains heavily subdued, and the overall availability of risk capital is around 10 times lower than in the US. “Looking ahead, EU institutions and Member States must come up with transformative actions to attract more investors, increase liquidity, improve the functioning of secondary markets, ensuring the seamless and integrated functioning of a single European capital market. Dynamic, deep and liquid, capital markets are instrumental in achieving Europe’s ambitions in delivering green and digital transitions.” In particular, AFME considers implementing the agreed equities and fixed income consolidated tapes, - which form part of the newly amended MiFIR - should be a priority going forward. A key element in this respect would be to enhance the equity tape with additional levels of order book depth. In more detail: The consolidated tapes will facilitate investors’ access to EU markets with a comprehensive and standardised view of equity and fixed income trading environments. The clearer picture provided by these consolidated tapes will contribute to making EU markets more competitive and attractive to all investors (including retail investors) regardless of their resources, sophistication or location. With the EU’s upcoming needs for private capital sources, this is a critical objective. These tapes are an initial step in making EU cross-border investments easier through the creation of a truly integrated pan-European market, which will ultimately benefit corporates when raising capital and investors when allocating their savings. This will contribute to the ultimate goal of increasing capital flows within the EU and defeating retail investors’ existing home bias (i.e. their tendency to hold a significant share of domestic assets in their portfolios). We also welcome the requirement for ESMA to assess the effectiveness of the consolidated tape for shares by no later than 30 June 2026, including the appropriateness of adding additional features to the equity pre-trade tape, which we would strongly support. We specifically recommend that at an appropriate time the equity pre-trade tape is expanded to include five levels of depth of the order book. This is technically possible and would be the most valuable option for the future subscribers to the tape, providing them with a wide range of non-latency sensitive use cases. Importantly, this would also ensure the commercial viability of the consolidated tape provider. AFME has continued to be a committed supporter of the CMU project and will continue supporting initiatives moving the project forward. AFME recently published its full recommendations for the next EU legislative cycle – available here. - ENDS -

The Association for Financial Markets in Europe (AFME) has today responded to ESMA’s call for evidence on shortening the settlement cycle in the European Union. Pete Tomlinson, Director of Post Trade at the Association for Financial Markets in Europe (AFME), said: “AFME welcomes the opportunity to respond to this important consultation. Moving to a T+1 settlement cycle will be a complex and demanding undertaking for the entire industry, so it is important that feedback is carefully considered before next steps are decided. Any move to a T+1 settlement cycle must be effected in a way that does not introduce new risks, damage the existing efficiency, liquidity and functioning of EU capital markets, create barriers to investing in the region’s securities markets, or diminish access to capital markets for issuers. “If a decision to move to T+1 is made, it will be necessary to define an appropriate timetable that generates industry momentum and provides clarity to market participants.” Among AFME’s key points are: AFME fully supports ESMA’s conclusion that any decision to shorten the settlement cycle in the EU should be based on a proper cost-benefit analysis. It is critical that this considers not only the impact on post-trade processes, but also potential broader market impacts on trading and liquidity and the competitiveness of EU markets. Any move to a default T+1 settlement cycle must be effected in a way that does not introduce new risks, damage the existing efficiency and functioning of EU capital markets, create barriers to investing in the region’s securities markets, or diminish access to capital markets for issuers, which would be contrary to the CMU objectives. AFME calls for a coordinated approach across Europe, including EEA countries, Switzerland and the UK. The North America migration to T+1 in May 2024 represents an opportunity to incorporate “lessons learned” before making a decision in Europe. However, it is important to remember that the complexity of the European post-trade ecosystem could make T+1 adoption a more challenging project in Europe as compared to other jurisdictions. -ENDS -

In response to today’s publication of key components of the UK implementation of the final Basel 3.1 standards agreed in December 2017, which will enter into force in the UK, in combination with the remaining elements anticipated for publication in the second quarter of 2024, Caroline Liesegang, Head of Prudential Regulation at the Association for Financial Markets in Europe (AFME), said:  “Implementing internationally agreed post-financial crisis reforms is an important step in maintaining the role of the UK as a leading international financial centre. Today’s publication of near-final policies on key elements of the Basel 3.1 package is a milestone in this regard, particularly for banks that play an important role in financing the real economy. The policies are closely aligned with international standards with some adjustments to improve risk measurement. “The adjustments include the recalibration of the alpha factor within the standardised approach for counterparty credit risk (SA-CCR). This limits any disproportionate increase in capital requirements for banks and the related impact on end-users' ability to access hedging products to mitigate their risks. “The PRA has also helpfully adjusted its approach in relation to the default risk of sovereign bonds by removing the inconsistency between the standardised approach and internal models. Under the PRA rules, banks are required to use the standardised approach for central government and central bank exposures. This approach should help in facilitating banks’ continued market making in UK government bond markets in support of the economy.  “However, there was scope for further improvements, for instance, through introducing greater differentiation in the treatment of regulated versus unregulated financial sector entities within the credit valuation adjustment framework. This would have recognised the lower risk of counterparties, such as insurance providers, that play a pivotal role in the real economy. Another example is the lack of recognition of insurance as a risk mitigant in the business indicator calculation in the operational risk framework - an approach that is inconsistent with other areas of the prudential framework and results in an overstatement of risk and disproportionate capital requirements.    “Nevertheless, we welcome the clarity brought through the publication of near final policies in these key policy areas and await the remaining elements: credit risk, the output floor, and reporting and disclosure requirements which will allow for the impact of the Basel 3.1 package to be assessed in its entirety.  “Additionally, we await the PRA’s planned review of the Pillar 2 framework to ensure there is no overlap with risks newly captured within the Pillar 1 framework as this will have a critical role in avoiding any undue increases in overall capital requirements.  “In the meantime, it will be important to ensure there is a coordinated timeline for implementing the package internationally, particularly as it relates to market risk standards. Developments in major jurisdictions should also be considered to ensure global consistency and to avoid harming the UK’s competitiveness.”  – Ends –

In response to the agreement reached by the European Parliament and the European Council on the CRR3 and CRD6 proposal, which will implement the final December 2017 Basel III rules in Europe and conclude an era of significant tightening of regulatory standards and constraints for credit institutions, Caroline Liesegang, Head of Prudential Regulation at the Association for Financial Markets in Europe (AFME), welcomed the agreement: “This agreement strengthens banks’ resilience and recognises their role in financing the economy. European banks have raised hundreds of billions in equity capital since the great financial crisis, resulting in record capital levels. This has resulted in greater stability in the financial system, effectively demonstrated earlier this year following some stress events in the banking system. AFME therefore calls on decision makers to resist further increases in capital requirements in the coming years as the banking sector goes through an important implementation phase and will need capacity to finance the real economy during the digital and green transition. “AFME in particular supports the agreement to maintain limited European market specificities while remaining faithful to the Basel principles. Improvements to the treatment of exposures to unrated corporates as the Output Floor is introduced are also welcome and should avoid unnecessarily restricting funding for corporates without ratings, which are key cogs in the EU economy. The recognition of the floor’s impact on securitisation and the introduction of a transitional arrangement to mitigate its impact is a positive development and will hopefully translate into the growth of the EU’s securitisation market. At the same time, a more extensive review of the capital treatment for the securitisation framework is important to ensure this tool can effectively be used by all banks, irrespective of their model approach, to finance the real economy. “Unfortunately, parts of the agreement lead to a suboptimal outcome for the European economy. AFME regrets that the Output Floor will be applied at the solo level of consolidation, despite the fact that it was calibrated by Basel to be applied at the highest level of consolidation. This is not in the interests of the competitiveness of the European banking market as it adds further market fragmentation. It is disappointing to see the lack of progress on market access which will inevitably have an adverse impact on the ability of EU financial institutions, corporates, governmental entities and individuals to access international markets and cross-border services. As further integration of the EU’s banking and capital market progresses, AFME hopes the EU will focus on addressing these obstacles to the free flow of capital and liquidity to allow for more efficient capital allocation in the EU. This will in turn benefit individuals, companies of all sizes and green/innovative projects. “As we look ahead at a long and complex implementation phase, it is important that the EU is flexible with regards to the implementation date, particularly with respect to market risk standards, to ensure global consistency and avoid harming its capital market competitiveness.” - ENDS -

The Association for Financial Markets in Europe (AFME) has today published a new report “Sustainable Finance in the EU: Priorities to unlock financing and investment”. The paper outlines AFME members’ views and recommendations on the functioning of the current EU sustainable finance framework, the implementation challenges that banks face in applying it to financing companies, and how its effectiveness could be improved. The paper then highlights AFME’s constructive recommendations for policymakers, including how policymakers and regulators can further enable financial institutions in providing financing in support of climate, environmental and social goals and provide a regulatory framework that helps to achieve this. Oliver Moullin, Managing Director of Sustainable Finance at AFME said: “Significant progress has been made in establishing the EU sustainable finance regulatory framework. A number of key areas of regulation now apply, with several more in the course of implementation. Nevertheless, the lack of clarity on policy to support the real economy transition combined with a number of significant challenges with the policy and regulatory framework are holding back the potential to further channel investments in support of sustainability objectives. “It is essential that the EU regulatory framework supports banks’ role in helping finance the transition and that it works in a way that supports the growth and competitiveness of the EU economy. It is time to take stock and consider targeted changes to enhance the coherence and effectiveness of regulation in achieving its objective. It is also critical to maintain focus on establishing roadmaps, reducing regulatory barriers and providing incentives for the real economy transition; and to provide greater emphasis on the important role of transition finance, recognising that financial institutions will need to provide finance to all parts of the economy throughout the transition.” AFME’s latest report highlights where financial institutions see challenges arising under the current regulatory framework, including: Lack of clarity on real economy transition and coherence with the sustainable finance regulatory framework; The availability of high quality data to support the use of sustainable finance tools and financial institutions’ own disclosure obligations; The usability and application of the EU taxonomy; The application of SFDR; Inconsistent treatment of derivatives in various disclosure metrics under the EU Taxonomy Regulation and SFDR; Alignment & coherence across the various ESG products disclosure regulations (e.g. SFDR, BMR, MIFID) Sequencing of the various reforms (e.g. SFDR, Taxonomy, BMR, Pillar 3) Concerns regarding potential allegations of greenwashing; Coherence and consistency of transition plans; and Challenges with international application and interoperability. The report sets out five priority recommendations to address identified challenges: Maintain focus on establishing roadmaps, reducing regulatory barriers for the deployment of sustainable investment projects and providing incentives for the real economy transition; Ensure that the regulatory framework is achieving its goals, is coherent and usable in practice to promote and support sustainable finance (including transition finance); Provide a stable regulatory framework with time for implementation and review how it is working in practice, with targeted guidance/changes introduced where needed in consultation with market participants; Ensure that regulation is promoting investment and does not adversely impact the competitiveness of financial institutions or companies operating in the EU and internationally; and Enhance international coordination and improve international interoperability with other key jurisdictions. Alongside recommendations on improving the functioning of the regulatory framework, the report also sets out recommendations in three further important areas which we see as priorities for EU policymakers: Facilitating transition finance; Developing carbon markets; and Scaling finance for nature. - ENDS -

Press releaseavailable inEnglish,French,German,Italian,Spanish Individual country analysis available forFrance,Germany,Italy,Spain The Association for Financial Markets in Europe (AFME) in collaboration with eleven other European and international organisations has today published the sixth edition of the “Capital Markets Union – Key Performance Indicators” report, tracking the progress of Europe’s capital markets against nine key performance indicators. This year’s report shows a mixed picture, revealing no discernible medium-term advancement on the CMU key performance indicators. This edition also coincides with the 30th anniversary of the Single Market. Here too, the data points show minimal change in the development of the EU's capital markets on a global scale. Adam Farkas, Chief Executive of AFME, said: “All the planned measures from the CMU Action Plan of 2020 have now been delivered by the Commission and EU leaders earlier this year committed to finalising negotiations on any open CMU issues before the next EU elections. However, certain goals, such as rebalancing the EU's funding sources toward more market-based financing, channelling individual savings into productive investments, and integrating national capital markets to create a unified EU market have not yet materialised to any meaningful degree. “It is clear that the financing structure of the EU economy will need to adapt, and at pace, if it is to support the EU’s significant and transformative investment needs, including the fast-approaching climate goals of 2030, as well as its demographic and competitiveness challenges. “Ahead of the next legislative cycle commencing, a strategic discussion on the best way forward will take place within the Eurogroup to set out recommendations for the next Commission. These recommendations are highly anticipated by the capital markets industry. The growth of an integrated capital market for Europe must continue to be a key priority if the European Union is to achieve its dual goals of sustainable and digital economic transformation.” Among the key findings of the 2023 report on European capital markets’ performance: Compared to last year’s numbers, there are slight improvements in some KPIs, mostly attributable to cyclical factors as 2022 was a particularly turbulent year for markets. When considering medium-term trends, it is clear that the EU has not made significant progress in developing its capital markets, particularly in terms of global competitiveness. While there are some slight improvements in some areas, these are mostly attributable to cyclical factors as 2022 was a particularly turbulent year for markets. Access to market-based finance for corporates has deteriorated, the amount of loans transformed into capital markets vehicles like securitisation has significantly declined, intra-EU integration has slightly deteriorated, while the amount of household savings in capital markets instruments has not shown any major progress. This calls for a closer look at the strategies being employed at EU level to deepen capital markets and a renewed focus on making real, lasting improvements that will have an impact going forward. EU competitiveness declines This year has seen a decline in the international competitiveness of the EU’s capital markets. AFME’s global competitiveness indicator shows the EU is still significantly behind the US and UK, particularly regarding access to finance, market liquidity, and digital finance capabilities. 30 years since establishment of Single Market,EU’s capital markets show no significant development, including on a global scale On 1 January 1993, the Single Market came into being. This year’s report provides a ‘snapshot’ of some key economic metrics to show how EU markets have developed over the past three decades. When viewed in this context, the data points are disappointing and there has been little change, including in a global context. For example, immediately before the creation of the Single Market, the current configuration of EU27 Member States accounted for 5% of global IPOs. In the first few years of the Single Market this rose to 20%. However, over the past three years, this figure was just 7% and the EU continues to be well below the annual flow of primary offerings observed in the US. Another bad year for EU IPOs IPO issuance fell 72% in H1 2023 compared to the same period last year. If current market trends persist, 2023 will be on track to have the lowest corporate IPO issuance volume since 2011. Appetite for market financing grows among corporates, but remains below historical levels In an EU business environment in need of diversification from over reliance on bank financing, there were positive signs of appetite for market financing increasing this year. In 2023, 10.3% of EU non-financial corporate funding was derived from capital markets sources, up from 7.8% in 2022 but substantially below the peak of 14.0% observed in 2021 and below 11.5% for 2016-2019, the years leading up to the pandemic.This was driven by a significant increase in bond issuance. End of cheap money era for SMEs as pre-IPO equity risk capital reverse Access to capital for SMEs has declined over the past 12 months. Early-stage funding, private equity and crowdfunding have all been affected. European households saw a decline in their savings in the form of capital markets instruments Savings levels grew substantially during the pandemic as spending was necessarily restricted, and many households put more of this money to work in capital markets. However, this effect is beginning to fade and, as inflation has risen sharply, our household investment indicator has declined to the lowest level since AFME’s first CMU report. The amount of savings in the form of capital market instruments stood at 90.4% of the EU’s GDP in 2023, falling from 91.4% in 2022. This is most likely due to people withdrawing from their savings to meet rising expenses. EU Securitisation issuance bounces back after a lacklustre 2022 This is predominantly thanks to a single large French RMBS deal (EUR 49.5 bn). If this deal is excluded, however, EU securitisation issuance would show a 15% decline. Over the last 10 years, annual securitisation issuance in the EU and UK has experienced muted growth. Adjusted by GDP, EU securitisation is strikingly low compared to other global economies. For example, in 2023, EU issuance was equal to just 0.3% of EU GDP, while UK issuance was equal to 0.7% of UK GDP, US issuance was at 1.1% of GDP, Australia at 2.6%, Japan at 1.4% and China at 1.5% of GDP. EU remains global leader in ESG bond origination ESG-labelled bond issuance in the EU represented 12.7% of total EU bond issuance in 2023. Issuers from other regions issued around 1% - 7% of bonds with ESG labelling, for example 7.1% (UK); 6% (Australia); 2.3% (China); 1% (US); 0.9% (Japan). EU fintech sector continued slowing down in 2023 Investment in Fintech saw a sharp decline in 2023 across regions compared to 2022. In the UK investment dropped by approx. 80%, followed by the EU where investment decreased by 78%. The US saw roughly 65% less investment in 2023 Fintech Unicorn valuations decreased across regions. In the EU the cumulative value of Unicorns decreased 20%. In the UK the valuation reduced 15%. – Ends –

AFME has responded to the European Commission’s consultation on a legislative proposal to open up access to financial data (FIDA proposal). James Kemp, Managing Director at the Association for Financial Markets in Europe (AFME), said: “We support the EU’s ambition to create a consumer-centric data-sharing ecosystem. To achieve this, policies such as the new EU Open Finance framework need to contribute to a fair and secure data ecosystem that adds value to consumers and end users. In order for the proposal to bring the full suite of benefits to the EU financial data ecosystem, some key changes are required – for example sufficiently regulating the new category of data users (‘Financial Information Services Providers’) and facilitating reasonable compensation that enables investments in secure and innovative data markets.” Among the key points from AFME’s consultation response are: Trust is key to building a data-sharing ecosystem. Building such trust requires secure data-sharing infrastructure and safeguards around the use of data. To ensure data is used correctly and securely, the Open Finance framework needs to uphold the digital operational resilience, cybersecurity and data protection standards currently applied to financial institutions. We remain concerned that the new category of data users (‘Financial Information Service Providers’) could become a weak link in the financial system if they are not adequately regulated and supervised to the same high standards. To maintain a fair and level playing field in data sharing across sectors, BigTech gatekeepers should not be allowed to authorise as Financial Information Service Providers and use data held by financial institutions under Open Finance until sharing of data by these companies has been effectively implemented under the Digital Markets Act. To preserve the ability and create the incentives for data holders to make adequate investments in secure data-sharing infrastructure, it is key that reasonable compensation be included in regulation, including the Payment Services Regulation. Compensation should be set in a way that enables access for all participants. For small and micro data users, we believe compensation should be capped at cost, whereas mid-sized and larger companies that use data should be required to pay a reasonable and market-led compensation to data holders for investing in secure data-sharing infrastructure. The greatest potential added value exists for retail consumers. Open Finance should therefore only be applied to individuals and SMEs. Moreover, data-sharing policies like Open Finance should not discourage banks and others from investing in data-driven customer services. Due to potential infringement on trade secrets and intellectual property, proprietary and inferred data should be kept out of scope. We also support data sharing without unduly delay, but real-time data sharing is disproportionately burdensome and does not yield commensurate benefits. Due to the complexity of scheme development and the technical build required, we support an implementation period of at least 36 months for the schemes, followed by at least 12 months for the rest of FiDA. This should begin with a phased approach that prioritises targeted use cases identified as delivering the most significant benefits and requiring limited development, also to facilitate a more balanced and pragmatic decision-making process with regards to the governance of the data sharing schemes. - ENDS -