Following the publication of the European Commission’s Capital Markets Union mid-term review today, Simon Lewis, Chief Executive at the Association for Financial Markets in Europe (AFME) said: “The CMU project is more important than ever to boost growth and investment and to channel capital to the real economy. In light of political and economic change, European capital markets are facing a number of challenges, not least from Brexit. We need to ensure that the CMU project, launched in 2015, remains relevant and fit for purpose. AFME supports the wide-ranging initiatives put forward in the review and looks forward to working with legislators to put the remaining building blocks in place.” AFME in particular welcomes the following priorities outlined: Review of the European Supervisory Authorities in particular, to strengthen ESMA's powers and increase the effectiveness of supervision for specific functions where warranted in view of the need to support a functioning CMU; A renewed focus on key growth areas, such as improving access to risk capital for small businesses throughout Europe, as well as infrastructure investment, including through adequate capital treatment of qualified corporate-form infrastructure investments by insurers; Stronger focus on fintech, with the need for an EU licencing and passporting framework for fintech activities being assessed later this year; Sustainable finance, with a strong push to develop a European policy programme on sustainable finance and the transition to a low-carbon economy; A push to improve the EU’s secondary markets for distressed debt, where the European Commission will launch an impact assessment on the Non-Performing Loans framework to enhance data quality and value recovery; Developing local ecosystems in the EU, particularly in Central Eastern Europe. - ENDS -

Following the outcome of the securitisation trilogues today, Simon Lewis, Chief Executive at the Association for Financial Markets in Europe (AFME) said: “The political agreement on the proposals for a Simple Transparent and Standardised (STS) Securitisation framework represents a crucial milestone in the development of a Capital Markets Union. While important details remain to be finalised, we are confident that the long-term impact of the STS framework will be positive. “Attention must now turn to implementation. It is critically important that both the STS Framework and the supporting Level II regulations are implemented in a co-ordinated, simultaneous and holistic way. To adopt a piecemeal approach would risk a damaging down-draught on issuance as higher capital requirements for bank investors take effect before lower capital requirements for insurers are introduced. “AFME therefore calls on the European institutions to choose an implementation date for the STS framework which will allow enough time for this important secondary legislative work to be completed. We urge colegislators to support this approach to help ensure the successful launch of the new STS framework as well as the revival of the wider European securitisation market.” -ENDS-

London, UK, 25 May 2017 - Commenting on the publication today of the Global Code of Conduct for the FX market – which provides a common set of guidelines to promote the integrity and effective functioning of the wholesale foreign exchange market – James Kemp, Managing Director of the GFMA’s Global FX Division said: “From the outset, the GFMA’s FX Division has been fully supportive of this initiative to create a Global Code of Conduct for FX. Given that foreign exchange underpins international trade and investing, we believe a single, global code provides a common reference point to encourage good practice and re-build public confidence in the FX market. “This is an opportunity for all wholesale FX market participants to demonstrate that they can put the right controls and guidance in place that are consistent with the principles of the Code and that ensure the market is operating fairly and effectively. “In response to the first phase of the Code, published in May 2016, our members have already made significant enhancements to their conduct and control standards. For example, placing greater emphasis on the first Line of Defence, strengthening the control environment and establishing more robust oversight structures. More emphasis is being placed on conduct training, as well as adherence to procedures and policies. However, there is no room for complacency. With the complete Code now published, our members will continue to strengthen their technology, policies and procedures to ensure they align with the principles.” – Ends –

AFME has today responded to the European Commission’s Public Consultation on the operations of the European Supervisory Authorities (ESAs). Simon Lewis, Chief Executive of AFME, said: “The European Supervisory Authorities play an important role in the European regulatory landscape and have broadly been successful in fulfilling challenging mandates since their establishment in 2011. While the institutional framework has been largely fit-for-purpose, we believe that a number of reforms should now be implemented to ensure that the ESAs will continue to function well in a changing political and market environment. This consultation is therefore very timely and AFME welcomes the opportunity to respond to it.” Overall AFME believes that the ESAs should take a more strategic role and be given greater autonomy by defining and pursuing a common EU approach. Enhancing regulatory coherence and consistency to avoid market fragmentation should be a top priority. In order to be able to deliver on an ambitious agenda, the resources of the ESAs should also be increased appropriately. The governance of the ESAs should be strengthened. Without reforming the current governance arrangements, increasing the powers of the ESAs would be less effective. In its consultation response, AFME identifies the following eight key priorities for the ESAs: supervisory convergence should remain a key priority as it reduces the fragmentation of the Single Market and enables firms to operate cross-border more easily. improve the involvement of stakeholders by creating more opportunities for contributions from market participants in the Level 2 and Level 3 processes, improving the transparency of how the ESAs deal with input from stakeholders and strengthening the role of the stakeholder groups. work with realistic implementation deadlines ensuring that sufficient time is given between the finalisation of Level 2 texts and their implementation. reform the governance of the ESAs enabling them to pursue a more common European approach by giving the Chairs and Executive Directors voting rights and introducing independent members on the Boards of Supervisors. increase the ESAs’ powers in certain areas of cross-border activity. Provide ESMA with “Emergency Relief” type of powers to temporarily suspend the application of regulatory requirements. give the ESAs a more prominent role in the equivalence assessment process following an outcome-based approach supporting open capital markets. increase the resources of the ESAs appropriately given the current workload and the proposed additional tasks. We would expect the ESAs to optimise their efficiency in a way to minimise the need for additional funding. accept a funding system which would be partly funded by the industry but subject to certain conditions and further detailed consultation with the industry. Although it is appropriate to consult on the functioning of the ESAs at this time, we believe it will be important to further reflect on the conclusions of this review at the time when the details of the future EUUK relationship are known. Any arrangements for supervisory and regulatory cooperation between the EU and the UK, which should involve the ESAs, can then be decided upon. AFME’s full consultation response can be found here.

Following the UK Government’s decision to invoke Article 50, AFME has today published a paper outlining the implementation issues facing wholesale banks, their clients and supervisory authorities.The paper, entitled “Implementing Brexit: practical challenges for wholesale banking in adapting to the new environment”, assembles the available evidence to help Europe’s policymakers reach an informed view of the potential challenges in Brexit implementation for wholesale banking and capital markets and how best to mitigate the risks arising to financial stability and market functioning of the two-year timeframe. Simon Lewis, Chief Executive at AFME, said: “Financial stability and market efficiency must be safeguarded during the Brexit implementation process and thereafter. These are essential ‘public goods’ for the European economy. Given the tight Brexit timescale dictated by Article 50, market participants and regulators are already having to consider important decisions amid considerable uncertainty. Building on our February study with PwC on operational complexity, this paper seeks to provide Europe’s policymakers with insights on the range of implementation challenges facing Europe’s capital markets.”Main implementation challenges outlined in the paper: Implementation challenges for clients: Brexit creates significant uncertainty for clients and counterparties and the potential for disruption to essential contracts; particularly for clients holding (or planning to hold) long-dated contracts such as swaps, loans or cross-border revolving credit facilities. after Brexit, a bank which had signed a contract may no longer have the required approvals to lawfully perform the services it had committed to, or can no longer access market infrastructure. there is particular concern about ’cliff edge’ risk to the operations of UK central counterparties, which currently manage more than a quarter of global clearing activity. there could be an impact on capital raising as EU27 companies may be uncertain whether they can or should rely on a single European hub for ECM and DCM services. Implementation challenges for supervisory authorities: Brexit will require supervisory capacity to follow a changing pattern of markets and banking business. In much of the EU27, expertise in markets supervision is in relatively short supply. there will be a major challenge for the SSM and national authorities to ensure that sufficient resources and expertise are in the right place to provide timely delivery of licence and model approvals and maintain or supervise rigorous, common standards for wholesale markets business. new mechanisms are also required for cross-border regulatory cooperation, avoiding fragmented capital markets and ensuring financial stability. Implementation challenges for wholesale banks: for international banks based in the UK, the main operational impacts of restructuring for Brexit are: establishing or expanding entities in the EU27; obtaining necessary licensing and approvals; securing the right people and premises; building technology; and integrating with new market infrastructure. a recent study by PwC for AFME1 found considerable variation in the required scope and scale of transformation activities across different banks. Overall the evidence that suggests that a 3-year implementation period will be required following the completion of the Article 50-exit negotiations. the eventual plans that banks will implement depend heavily on the requirements set by regulators and supervisors, adding a dependency and additional source of variability to the process. Key recommendations from AFME Given the scale, complexity and risk of the Brexit implementation challenges for wholesale banking, AFME is highlighting the need for significant support from policymakers and regulators comprising three elements: coordination; flexibility; and time. coordination: Market functioning and the implementation process would benefit greatly from coordination by EU27 and UK policymakers in four key aspects: legal certainty, financial stability risks, market capacity and supervisory policy. flexibility: Policymakers should be prepared to provide flexibility where it is necessary to support successful implementation of any change programs by the wholesale market participants, including on contracts, entity approval and licensing, as well as model approval. time: Transitional arrangements could comprise: a bridging period to avoid short-term disruption until the new trade relationship between the UK and the EU27 is ratified, should that prove unachievable within the two-year Article 50 period; and an adaptation period, following the bridging period, which would enable phased adjustment to the new trade relationship. The sooner that a phasing-in period is confirmed then the smoother the adjustment process will be. Click here to download the report Press release also available in: French German Italian Spanish

Commenting on the decision by the UK government to trigger Article 50 today, Simon Lewis, Chief Executive at AFME, said:“This is an important step, formally commencing the Brexit process, and we welcome the fact that the UK government has proposed implementation periods to avoid any cliff-edge. It is essential that financial stability and market efficiency are safeguarded, both during and after the implementation process.“As our recent study with PwC on the operational impact of Brexit makes clear, a period of time to adapt will be required following completion of the Article 50 exit negotiations.“We encourage policymakers to be risk sensitive in their approach and to reach early agreement on a phased implementation which will enable capital markets participants based in the EU27 and the UK to adjust smoothly and maintain their capacity to serve clients across Europe and internationally.”– Ends –

Ahead of the 60th anniversary of the Treaty of Rome celebrations this weekend, AFME has issued the following statement:“As leaders from around the European Union prepare to come together to mark the 60th anniversary of the Treaties of Rome, AFME reaffirms its strong commitment to supporting the EU’s efforts to promote sustainable economic growth and open and integrated financial markets.“Among the EU’s many achievements, of particular importance has been the progressive removal of many of the barriers fragmenting these markets.“At a time when the European project and the EU are facing difficult challenges, European financial markets have a key role to play in providing the resources Europe needs for boosting innovation, jobs and growth. The need for the EU to reconnect with citizens has never been stronger and EU policies focusing on jobs and growth have the potential to show EU citizens what the EU can concretely do to improve their daily lives. European projects like the Capital Markets Union, the Banking Union and the Investment Plan for Europe are more important than ever in helping to achieve those objectives. AFME is keen to continue to play its part in ensuring the success of these projects and of the EU more broadly.”– Ends –

the Investment Association and the Association for Financial Markets in Europe’s ‘Indications of Interest’ code of conduct is now live on trading terminals for investors across Europe a filtering system has also been launched allowing asset managers to identify brokers using the framework the code will enable investment managers to gauge more accurately where they can find market liquidity to get the best price for their clients Today marks a milestone in the relationship between the investment and broking industries, with the completion of a new code of conduct for the communication of ‘Indications of Interest’ (IOIs). IOIs are used by brokers to express their willingness to buy or sell shares at a given price. The code is the result of a collaboration between the Investment Association (IA), which represents investment managers, and the Association for Financial Markets in Europe (AFME), the trade body that represents banks and brokers.Phase one of the process was completed in 2015 where the code drew a distinction between two kinds of IOIs: ‘C:1 Client Natural’ and ‘P:1 Potential’. ‘Client Natural’ refers to orders that can be satisfied immediately, without market impact and ‘Potential’ refers to those that may not yet be firm and may involve market impact.The Associations have now updated the classification model by adding in a complementary IOI category to the Client class to offer investment managers the opportunity to see orders that can be filled in their entirety and those that can be proportionally met.This framework will play an important part in ensuring that ‘block trades’, where shares are bought or sold by investment managers in large size, can be carried out with a more predictable market impact meaning better client returns. In addition to adding greater granularity to the Client IOIs class, a filtering tool is also now live on trading terminals, including Bloomberg to ensure that investment managers can see the orders most appropriate to them. This filtering tool will allow managers to distinguish between IOIs that are backed by a client position and those that reflect a position held or wanted internally by a broker (referred to as ‘House Interest’).Chris Cummings, Chief Executive of the IA, said: “The investment industry is embracing the fin-tech revolution and today’s launch of the new framework is another step by the industry to use technology effectively to the benefit of its clients.The code unites both the buy and the sell side and will allow investors to shut out market noise and see where real market liquidity lies to get the best price, and therefore returns for their clients.”Simon Lewis, Chief Executive of AFME, said:It is encouraging that there was such a strong consensus between the investment managers and brokers for a simplified approach that goes beyond regulatory requirements. The framework agreed by the AFME and IA members represents a well-coordinated and well-timed industry effort and will aid participants in European equity markets in the discovery of real liquidity.” The Investment Association and AFME IOI Framework can be viewed in full here: - ENDS -

AFME has today submitted its response to the European Commission’s public consultation on the capital markets union mid-term review 2017 providing clear policy recommendations to pursue in the second half of the Commission’s term. Simon Lewis, Chief Executive of AFME, said: “The case for CMU remains strong and compelling to increase financing to the wider economy. The development of well-functioning cross border capital markets is crucial to support high growth companies, as well as to provide investors with reasonable returns in times of low interest rates.”“The CMU project is well underway and Vice President Dombrovskis and his team have undertaken significant efforts to establish the right conditions for developing Europe’s capital markets. But there is still much work to be done. It is important to keep up the pace in this second wave of the project to ensure the timely and successful delivery of CMU, which will remain essential well beyond the term of the current Commission.”In its response, AFME outlines three overarching objectives for the second half of the Commission’s term: address Europe’s shortage of risk capital: the Commission and co-legislators should prioritise actions that would make risk capital more widely available, particularly for Europe’s high growth businesses; maintain and promote well-functioning secondary markets: policymakers should continue to focus on preserving and enhancing market liquidity, particularly by considering the impact of market conduct regulations and CRR II rules on the functioning of wholesale markets; deliver on the actions already in train: the Commission published its CMU Action Plan in 2015 which already contains many important initiatives that should help to develop Europe’s capital markets. It is important that all actions are delivered on and Member States need to act swiftly to address the barriers identified. Based on these objectives, AFME suggests ten policy priorities: the importance of supporting alternative forms of financing in the pre-IPO phase; support SME growth markets further to provide a source of finance for growth companies; the need to focus on less developed capital markets and how CMU can help to develop them, recognising the role that regional markets can play in this context; the need to focus on sustainable finance and infrastructure as key asset classes to support long-term economic growth; the importance of progressing the regulatory review agenda to make sure that the regulatory framework supports capital markets, both those which are established and others which are less developed. Regulatory consistency and coherent calibration is fundamentally important in ensuring that wholesale markets fulfil their role in matching investors and investment opportunities globally; the need for further national pension reforms; well-functioning secondary debt markets for existing markets such as investment grade corporate bonds, and enhancements for less liquid or illiquid markets, for example ABS and NPLs; the importance of maintaining a robust secondary market infrastructure to facilitate capital raising and trading, including having appropriate best execution and reporting requirements; addressing the withholding tax barriers currently in place and consider the options for going beyond the recommendations that have already been made to Member States; the global context of CMU by arguing in favour of open capital markets which operate with a sensible equivalence framework, all supported by well-functioning ESAs. AFME remains strongly committed to CMU and looks forward to working together with legislators to make sure that the building blocks of a successful CMU are being put in place by 2019.The full response can be found here

Industry calls for more action on risk capital for Europe’s high growth firms. AFME has today published a new report examining the specific challenges associated with raising risk capital for small and mid-size high-growth companies in the European Union. The report aims to inform policymakers about the challenges facing Europe’s high growth companies in obtaining crucial early stage financing.“The Shortage of Risk Capital for Europe’s High Growth Businesses” was authored by AFME with the support of 12 other European organisations representing all the different stakeholders involved in pre-IPO finance. These include the European Investment Fund (EIF), seven other European trade associations representing business angels (BAE, EBAN), venture capital (Invest Europe), accountants (Accountancy Europe) and crowdfunding (ECN), as well as stock exchanges (FESE, Deutsche Bӧrse, LSE, Euronext, Nasdaq).Simon Lewis, Chief Executive of AFME, said: “Europe’s shortage of risk capital for high-growth businesses is a pressing issue, particularly given the enduring low growth environment. Collectively, we are pleased to present this pan-European report providing data and recommendations on improving access to equity and venture debt financing for high growth companies. The industry looks forward to working with the Commission to help further the Capital Markets Union and growth agenda and boost EU companies’ competitiveness.”Olivier Guersent, Director-General at DG FISMA, said: “The European Commission welcomes this new pan-European study on the shortage of risk capital for ambitious firms seeking to expand. This is one of the core challenges that the EU's Capital Markets Union seeks to address. The inadequate supply of risk capital has been a longstanding constraint on European firms with high growth potential. Under CMU, the Commission has tabled several initiatives to improve the functioning of these markets. However, there is no quick fix. European policy-makers need to stay focussed on this structural challenge in the years ahead. This report is very timely as the Commission prepares to refresh the CMU action plan through its mid-term review." The report identifies the main barriers preventing the creation and growth of businesses in Europe and makes the following recommendations to address them: Fragmented start-up marketEstablishing a single EU framework for start-ups with standard rules across EU Member States would enable young businesses to scale-up across borders and facilitate access to 508 million customers. This could be done through the establishment of an EU expert group to focus on the revision of the various EU legal frameworks, insolvency laws and tax incentives for investors. There is already momentum for such a transformation with the recent Commission Start-up and Scale-up Initiative, including the proposal for an Insolvency Directive; Lack of awareness of risk capital benefits among businessesImproving awareness among entrepreneurs of how to gain and retain risk capital investors would reduce business failure rates. Better business structure and governance from the start would increase the chances of raising subsequent rounds of financing from professional investors. Businesses with stronger cash positions would emerge, leading to higher chances of survival; Under-developed business angel and crowdfunder capacityUnlocking business angel and crowdfunder capacity would allow them to invest in companies across the EU. Creating a single market for business angel investors by aligning best practices and ensuringconsistent tax incentives in the EU28 could be one way to provide more risk capital to Europe’sinnovative businesses. Education, training and certification of individual investors, as well as thepromotion of the role of syndicates and networks with a European reach, would also increase thenumber of crowdfunders and business angels; Insufficient business angel exit opportunitiesIf business angels and crowdfunders are to invest more, they must have access to better exitopportunities. The development of networks and training, as well as the development of secondarymarkets for private shares at EU level would enable such access; Insufficient venture capital fundingIf Europe’s VC industry is to provide more funding, it needs to scale up. This could be achieved byproviding incentives for investing in VC funds, encouraging investment in the asset class andpromoting pension savings in the EU28 generally. Achieving a workable EU-level marketing passportfor VC fund managers (as part of the review of the EuVECA) and the launch of the pan-European fundof funds are good steps forward; Small venture debt marketDeveloping the venture debt market in Europe could provide the necessary funding for VC-backedbusinesses to reach their next milestone. Venture debt can fill the gap between two VC equity rounds. Unfavourable environment for businesses to access public marketsBuilding a favourable environment for access to capital markets would help small businesses accessthe information necessary to initiate long-term growth financing strategies. To do this, thedevelopment of SME advisory ecosystems of issuers, advisors, entrepreneurs, academics andEuropean centres of innovation is recommended; Sluggish primary equity marketThere is a need to tackle the decline in IPOs, which play a crucial role in Europe’s economy. Theproposed Prospectus Regulation is a great opportunity and further initiatives should be undertaken,such as supporting new categories of investors to invest in high-growth companies. The report outlines the various sources of EU financing available to Europe’s high-growth businesses, (including family and friends, accelerators, equity crowdfunding, business angels, venture capital, venture debt, public markets and public funding), but highlights that many of these are underused: Europe could invest more in risk capital: three million EU citizens hold non-real estate assets in excess of €1m – if even a small part of this were used for business angel investing, it would make a huge difference; European companies received €1.3m on average from venture capital compared to €6.4m in the US; Venture debt is underused: only 5% of VC-backed EU companies obtain venture debt financingcompared to 15-20% in the US and 8-10% in the The report also includes an analysis of the main providers of risk capital for small innovative companies in Europe, showing that there is room for improvement in the European risk capital landscape: Business angels invested in half the number of businesses in Europe compared to the US. Only 12 EU Member States have tax incentives for early-stage investments; VC funds in Europe invested €4.1bn compared to €26.4bn on average in the US between 2007-15; Only 44% of EU VC investments went to later stage businesses compared to almost two-thirds of allVC investments in the US; Equity crowdfunding is growing in Europe with €354m invested; Origination activity in the EU has remained subdued since the 2007 crisis: in 2005-2007 an average of€11bn was raised annually through 300 IPOs per year. Since then, the annual average has fallen to€2.8bn with 161 IPOs per year between 2008 and 2015. A majority (61%) of European listed companies have market capitalisation of less than €200mcompared to just 46% in Hong Kong and 39% in US emerging growth companies. The report is part of AFME’s broader growth initiatives and is the third in a series of publications focussing on unlocking growth and jobs in Europe. Earlier publications include Bridging the growth gap, which highlighted the gaps in equity financing for small and mid-sized companies. This was followed by Raising finance for Europe’s small and mid-sized businesses translated in six languages. – Ends – Press release also available in: French German Italian Spanish