The AFME High Yield Investor Group has today published a list of sample investor questions in connection with typical high yield transactions. The list was put together as an indicative set of questions that may be asked of banks and issuers during management presentations or conference calls for the marketing of high yield bond transactions. The questions generally relate to structure and covenant terms and are intended to help inform investors about specific aspects of a particular transaction, particularly those that might be considered “non-standard”. In addition, AFME has amended its Non Investment Grade Debt Disclosure Guidelines to recommend that investors are afforded an opportunity to discuss the capital structure and covenants in each transaction during marketing. Gary Simmons, Managing Director of the AFME High Yield Division, said: “Investors have stated that they are sometimes not afforded sufficient time or opportunity to ask questions on the structure and covenants package relating to a deal, particularly those covenants, terms and conditions considered non “traditional”. As such, AFME’s investor committee has put together a list of questions, which they hope will serve as a helpful reminder to banks and issuers of their concerns with respect to the terms and conditions of high yield bonds.” The Sample List of Investor Questions and the updated High Yield Disclosure Guidelines can be found on the AFME website. – Ends –

Following the publication of the Certification Regime, Fitness and Propriety Guidance by the Banking Standards Board today, Simon Lewis, Chief Executive at AFME, said: “AFME welcomes the Banking Standard Board's good practice guidance for banks and building societies assessing the fitness and propriety of staff subject to the Certification Regime. AFME continues to work hard with the industry to improve standards of conduct and culture in the financial sector, including efficient implementation of measures such as the Senior Managers and Certification Regime and the European Banking Authority revised Guidelines on internal governance.” – Ends –

AFME has commissioned a report from PwC, outlining the operational impacts and transformation challenges that Brexit poses to the provision of banking services in the EU.The report, ‘Planning for Brexit – Operational impacts on wholesale banking and capital markets in Europe’ aims to provide policymakers and other industry stakeholders, both in the EU27 and the UK, with a fact-based analysis of how these challenges are likely to affect the financial services industry.To inform the study, information was gathered by PwC from previous case studies and from 15 banks spanning a range of sizes, activities, origins and legal entity structures. They include EU27 headquartered, UK headquartered and non-EU headquartered banks in broadly even measure.Key findings of the report include: the Brexit transformation will be highly complex for wholesale banks and contains many interdependent activities. Firms providing a significant proportion of current industry capacity will need to execute transformation programmes which will extend beyond Article 50 timescales and in many cases up to three years after Brexit has been completed; or even longer if the post‐Brexit trading relationship between the EU and UK remains unresolved for a protracted period. in executing their transformation programmes, banks will be heavily dependent upon timely approval of licenses by their new EU regulators. This represents a critical step in the implementation of new business models and is likely to occur at a time when regulators will see a peak in requests following Article 50 activation. banks are currently proceeding with two‐year tactical plans to maintain continuity of service. However, these plans are likely to be sub‐optimal for clients and market effectiveness, and will be dependent on reaching agreement about an interim business model that is acceptable to new EU27 regulators and can be put in place before the UK leaves the EU. In order to assist the wholesale banking and capital markets industry support European corporates and continue to help growth across all of Europe, the report recommends that policymakers: clarify with each industry participant as soon as possible the structure of any interim business models that may be deemed acceptable immediately post‐Brexit. clarify as soon as possible any future permanent terms for the provision of wholesale banking and capital markets services between the UK and EU post‐Brexit. following Brexit and agreement of any new market access arrangements provide an implementation period of at least three years to allow banks to complete their adaptation, and 'grandfather' transactions that are in force at the time that the UK leaves the EU. – Ends –

Commenting on the publication of The United Kingdom’s exit from, and new partnership with, the European Union White Paper by the UK government today, Simon Lewis, Chief Executive at AFME, said: "The UK government has today published its White Paper on Brexit providing some further welcome clarity on its objectives for Brexit.“Whatever the shape of the final deal, we have consistently said that the exit process outlined in the EU Treaty, including Article 50, does not on its own provide sufficient flexibility to ensure a smooth adjustment across all sectors of the European and UK economy. Robust transitional provisions will be essential to ensure orderly adjustment to the ultimate post-Brexit arrangement. “Our new study with PwC on the operational impact of Brexit on wholesale banking describes the realities that our members are having to prepare for a hard Brexit outcome. Our findings help to validate the consensus view that transition arrangements will be necessary to minimise the impact on the provision of client services and disruption to the market.“We call on policymakers to reach early agreement on a Brexit transition arrangement which enables the capital markets to adjust smoothly and maintains their capacity to serve clients across Europe and internationally.”– Ends –

The Association for Financial Markets in Europe (AFME) has today opened a new office in Frankfurt with a view to expanding its European footprint.Simon Lewis, Chief Executive of AFME, said: “Frankfurt houses some of the most important EU institutions including the ECB, ESRB, EIOPA and the German regulator, BaFIN, as well as parts of the Bundesbank. We are looking forward to using our on-the-ground presence to deepen our relationships within these institutions and on behalf of our members. We are now present in London, Brussels and Frankfurt and are keen to extend our footprint in this measured way.”The Frankfurt office will be used by AFME staff for local meetings. AFME’s first board meeting of the year will also be held in Frankfurt.The Frankfurt office address can be found on AFME’s website.– Ends –

Commenting on the speech made by the Prime Minister on the Government’s negotiating objectives for exiting the EU, Simon Lewis, Chief Executive at AFME, said:"The Prime Minister has provided some welcome clarity on the UK Government’s objectives for Brexit and acknowledged the importance of an adjustment period to limit the disruption to Europe's financial services sector. We look forward to seeing more detailed proposals on interim agreements and on market access arrangements to support well-functioning capital markets across Europe."– Ends –

Following the vote on the Simple Transparent and Standardised (STS) Securitisation package, announced today in the European Parliament, Richard Hopkin, Head of Fixed Income at AFME, said: “As the trade association that represents all the leading industry participants in European securitisation markets - including originators, sponsors and issuers, underwriters, investors - we welcome the fact that the European Parliament and Council have now endorsed the establishment of an STS framework and that MEPs support in principle the introduction of a regime for both third country STS securitisations and for non-EU participants.” “However, we are concerned that many aspects of the proposals run counter to the objective of reviving securitisation in Europe and, if adopted as currently proposed, will discourage the use of securitisation as a funding and risk transfer technique. Unless these concerns are addressed in the trilogue discussions, this key component of the Capital Markets Union will not succeed.” European securitisation has performed very well through and since the financial crisis. Yet with issuance in Europe as low as EUR40.2bn at the end of Q3 2016, the market remains moribund – largely because of the lack of a level playing field with similar fixed income products created by punitive regulation which does not recognise this strong performance. If key provisions of the final text of the Parliament’s compromises are not significantly recalibrated then all securitisation – not just STS securitisation - will become prohibitively burdensome in Europe, the STS framework is likely to fail and securitisation as a whole – whether STS or not – will not be able to provide much-needed funding to the real economy. In particular, the following key areas should be addressed: Capital and “proxy data”: allowing European banks to use proxy data will help to reinforce a true Capital Markets Union by opening up a much wider range of potential investors across Europe and establishing a more level playing field globally; Proper recognition of private transactions: including appropriately adjusted, yet prudent standards for disclosure for private transactions, which play a key role for businesses and consumers, is key; Transparency: standards of disclosure in European securitisation are already very good and much better than for other fixed income products. The market is not failing to revive because of shortcomings in disclosure. Proposals for controversial new requirements like investor name-give up will further dissuade investors and increase costs for issuers, as well as risk conflict with already existing and well-functioning regimes and regulations; Restrictions on market participants: permitting only regulated entities to undertake securitisation will reduce rather than expand the use of this technique and exclude many real economy corporate issuers from the market. Allowing only institutional investors to participate will concentrate, not diversify, risk - and risk damage to financial stability; Risk retention: increasing risk retention for all securitisations, not just STS, will damage the efficiency of securitisation as a funding tool and make it more difficult for banks to transfer risk, thereby reducing their ability to lend to the real economy. Further, for some sectors of the market, such an increase poses an existential threat. These changes to prudential regulation are being proposed in the absence of any evidence supporting change, without any impact assessment and in the face of opposition from the ECB, the EBA and the European Commission - as well as the industry. They should be dropped – the existing regime has been reviewed many times over the years, and shown to work well. – Ends –

The Association for Financial Markets in Europe (AFME) has published a new due diligence questionnaire with a view to standardising and simplifying the process of completing such questionnaires for sub-custodians. Previously, sub-custodians faced the burdensome challenge of responding to clients’ individual questionnaires, which were inconsistent in the questions outlined and covered many of the same risk themes and due diligence topics. Consensus was built to simplify the process of evaluating sub-custodians at the Network Managers (NeMa) conference in 2015. The AFME Post Trade Board subsequently created an AFME Task Force, comprising about 20 Network Managers, with a view to producing the harmonised questionnaire. The work was coordinated by a group of leading European and international banks with operations in Europe that issue and receive proprietary questionnaires aimed at ensuring that securities and cash are held appropriately in safe custody. Using a Thomas Murray questionnaire as a baseline, AFME’s goal was to harmonise 80% of members’ questions. That percentage proved to be significantly higher when AFME recently piloted the document.The harmonised questionnaire provides for certainty in relation to an agreed set of questions and simplification of the process for all parties. Alan Cameron, Global Solutions Sponsor - Clearing and Custody Services at BNP Paribas Securities Services and Chair of the AFME Due Diligence Questionnaire Task Force, commented: “Our industry is delighted that AFME took the lead in addressing this long-running and increasingly burdensome issue. We are grateful to all the banks that contributed to this project and look forward to working with them to ensure the maximum usage in 2017 and the years ahead. Whilst getting the questions agreed amongst ourselves is important, the success of this project will be measured by usage across our industry.” Stephen Burton, Managing Director, AFME Post Trade, added: “AFME’s harmonised and standardised questionnaire will accelerate the completion process, highlight discrepancies and allow for a year-on-year comparison. The finalised document was only possible due to the commitment of the Task Force members. We are pleased that so many banks have decided to use the questionnaire in next year’s due diligence process.”AFME members encourage the use of this document by clients of global custodians, and sub-custodians as providers to global custodians who are involved in sending or responding to due diligence questionnaires.The document will be reviewed by AFME in the third quarter of 2017 to reflect any regulatory changes or major themes which develop over the coming year.The questionnaire is available to all in word format, free of charge, at: http://www.afme.eu/en/reports/industry-guidelines/ Firms participating the development of the questionnaire included: Bank of America Merrill Lynch, BNP Paribas, Barclays, BNY Mellon, Citi, Deutsche Bank, Goldman Sachs International, J.P. Morgan, Nomura, Nordea, Northern Trust, Standard Chartered, Société Générale, Standard Bank, Thomas Murray Data Services, UBS and UniCredit.

Commenting on the publication today by the European Council of its conclusions on tackling bottlenecks to investment identified under the Third Pillar of the Investment Plan, Simon Lewis, Chief Executive of AFME, said: “The Council conclusions on removing bottlenecks and providing greater regulatory predictability are an encouraging signal for the European investment environment. AFME is a long-time advocate of a strong and stable European Single Market enabling investment, jobs and growth.” “The Investment Plan for Europe is one of the European Commission’s key initiatives together with the successful implementation of the European Fund for Strategic Investments (EFSI). The EFSI’s potential extension is to be welcomed.” Despite an improvement in the European economy, private investments are still below 2008 levels. According to Eurostat, EU28 private investments as a percentage of GDP decreased from 22.5% in 2008 to 19.5% in 2015. AFME has consistently suggested that some key bottlenecks could be removed to help increase investment in Europe. These barriers include: Fragmented internal market. The fragmented internal market causes a shortage of risk capital in Europe’s small businesses. Different rules, taxes and standards are hampering young businesses seeking to scale-up across borders. Unfair treatment of infrastructure corporates. Infrastructure private capital benefits from the EFSI and the recent establishment of an infrastructure project asset class under which insurers would benefit from reduced capital requirements. Similar treatment for infrastructure corporates, which represent four times more volume than projects, would remove a clear barrier to infrastructure investments. Inconsistent EU insolvency frameworks. The creation of a consistent EU insolvency framework will benefit Europe’s economy by providing greater certainty to market participants, reducing costs for investors, increasing recovery rates and making it easier to turn around viable businesses.

Commenting on the publication today by the European Commission of the package of proposals including the fifth Capital Requirements Directive (CRD V)/second Capital Requirements Regulation (CRRII) and Total Loss Absorbing Capacity (TLAC)/ minimum requirement for own funds and eligible liabilities (MREL), Michael Lever, Head of Prudential Regulation at AFME, said:“AFME welcomes the publication of the Commission’s proposals today as another significant piece of the global financial reform programme in Europe.“The CRDIV/CRR has already greatly reduced the likelihood that banks will fail by increasing significantly the quantity and quality of capital they hold and by making them less leveraged and more liquid. The present CRDV/CRRII package builds on what has been achieved so far, introducing a binding stable funding and leverage ratio requirement. AFME supports the implementation of these requirements in the EU in a manner that will enable the sector to support economic growth and the development of the Capital Markets Union, as we communicated to the Commission in its call for evidence.“We also welcome the proposed implementation of TLAC in the EU, together with revisions to the Bank Recovery and Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRMR) to increase alignment of European MREL requirements with global standards. Following substantial progress, these parts of the package represent the final steps in establishing an effective recovery and resolution framework. While the CRD/CRR significantly reduces the likelihood banks will fail, the TLAC/BRRD/SRMR package ensures that authorities have the tools to deal effectively with banks should they fail. In practice, this means that banks can be resolved in an orderly manner while continuing to carry out functions that are critical to the economy and financial stability, and importantly without taxpayers footing the bill. AFME continues to be very supportive of this objective.“We look forward to reviewing the proposals and engaging with the co-legislators over the coming months to ensure that the EU has a financial stability framework in place that achieves the most appropriate balance between a robust, resilient and resolvable financial sector and a vibrant, growing economy.” Visit AFME's CRDV/CRRII page – Ends –