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AFME has today published new research showing that European insolvency law reform could boost GDP output and create jobs across Europe. Insolvency reform is a key plank of the European Commission’s action plan on Capital Markets Union (CMU).The research, produced in cooperation with Frontier Economics and Weil Gotshal & Manges LLP, shows that improvements in insolvency frameworks across the EU could increase GDP by between €41 and €78 billion (or between 0.3% and 0.55% of EU28 GDP). The research also estimates that total EU employment could increase by between 600,000 and 1.2 million jobs.The report, entitled “Potential economic gains from reforming insolvency law in Europe”, finds that much of the absolute gains from insolvency reform could flow to Italy, Spain and France. Countries such as Greece, Hungary and Romania stand to gain most in relative terms; adding 2% to long-term GDP if they can bring their insolvency regime up to the European average.Simon Lewis, Chief Executive of AFME, said: “Closer convergence of EU insolvency rules would help to build a truly integrated Capital Markets Union, benefiting investors and providing greater flexibility for companies. Our research highlights the scale of the potential economic prize. With the Commission due to propose a legislative initiative on business insolvency later this year, we hope that this report will make a positive contribution to the policy debate.”Currently, national European insolvency laws vary in many respects. These differences can have a range of negative effects on financial markets and the real economy, including: increasing uncertainty among investors; discouraging cross-border investment; discouraging the timely restructuring of viable companies in financial difficulty; and making it harder to address the high levels of non-performing loans (NPLs) in the European banking system – a vital issue for banking union. In its action plan on CMU, the Commission has highlighted that adopting minimum standards for insolvency law across Europe would help to alleviate these negative effects. In this respect, AFME’s report recommends: a Chapter 11-type stay of proceedings to enable quick and effective restructuring. granting super-priority status to new financing to provide working capital to a distressed company; giving creditors stronger rights to propose viable restructuring plans; and requiring national insolvency agencies to publicly report on outcomes. Andrew Wilkinson, Head of European Restructuring at Weil, said: “Europe still faces huge challenges in the aftermath of the global financial crisis. Given the scale of the NPL problem, the fragile recovery and enduring concerns about the resilience of Europe's financial institutions, efficient debt restructuring laws are urgent and important. This difficult issue has been left unaddressed for too long. The EU could reap significant benefits for creditors and debtors across the EU by enhancing the possibility of rescuing viable businesses, lowering borrowing costs, limiting the loss of value caused by insolvency and ensuring that large corporates and SMEs have equal access to the best possible restructuring tools and procedures. The catalysing effect that insolvency law reform could have on stimulating recovery in the EU economy by providing an improved legal framework for banks to tackle NPLs and reallocate capital to prospering businesses underscores the significant macro-economic benefits that could be achieved by Commission-led legislative reform in this area.”Amar Breckenridge, Senior Associate at Frontier Economics, said: “We are pleased to have collaborated on this informative report, the findings of which underscore the important contribution insolvency regulation reform can make to the EU’s broader agenda for competitiveness and growth.”The economic impact of insolvency reform in Europe is a relatively new area of research and the amount of economic evidence that has been collated so far is quite limited. AFME’s study seeks to increase the evidence base by using market data in order to test the impact of the quality of national insolvency frameworks on corporate bond yields.The report also contains an overview of current national insolvency regimes in France, Germany, Italy, Spain, the UK, the Netherlands and Luxembourg, as well as case studies relating to recent cross-border insolvency procedures and recent reforms at national level. Also available in: German French Spanish Italian

AFME has submitted its response to the European Commission’s Call for Evidence on the EU regulatory framework for financial services providing the Commission with clear recommendations for reform that would benefit corporates and investors and strengthen capital markets.Simon Lewis, Chief Executive of AFME, said: “With the majority of the regulatory reform programme now adopted, the Commission is right to start examining the cumulative impact of regulatory reforms on the real economy. This is a key element of the CMU action plan, the Commission's flagship project to ensure capital markets flourish in Europe and deliver jobs and growth.”Viewed in isolation, many of the measures from the regulatory reform agenda were both necessary and have had their intended effects. The regulatory reform programme has substantially strengthened the resilience of the banking sector, improved investor protection, and is significantly reshaping how financial markets operate.AFME’s stand-out recommendations for reform concern the need to: avoid further restrictions on market liquidity by inter alia amending the Central Securities Depositories Regulation (CSDR) and re-evaluating the case for Bank Structural Reform (BSR); make targeted changes to prudential rules (e.g. Capital Requirements Regulation (CRR), Solvency II) which may be restricting financing to the economy; carefully reflect before imposing any new regulatory burdens at Basel level. “We need to make sure Europe's regulatory framework is efficient and fit for purpose. Our response focuses on reforms that will improve banks’ ability to finance the economy and provide much-needed capital market services,” added AFME’s CEO.In addition to the response to the Call for Evidence, AFME has submitted a supplementary evidence note. The note takes stock of the EU regulatory reform programme that has been implemented and the structural changes that the wholesale financial markets have undergone. It also identifies some of the emerging concerns about the cumulative impact of regulation on long-term investment, credit allocation, market liquidity and risk management.The Annex to this Press Release includes the key recommendations from AFME’s response to the Call for Evidence.– Ends –

Washington, 14 January 2016 – The Global Financial Markets Association (GFMA), the Institute of International Finance (IIF) and the International Swaps and Derivatives Association (ISDA) have issued the following statement on the Fundamental Review of the Trading Book (FRTB) framework issued today by the Basel Committee on Banking Supervision (BCBS):“GFMA, IIF and ISDA share the Basel Committee’s goal of ensuring the safety and soundness of the global financial system, which is critical to enhancing investor and consumer confidence, and economic growth. We have remained supportive of BCBS’s work throughout the G20-mandated post-crisis programme and have continued to do so during the Fundamental Review of the Trading Book.“In our preliminary review, we appreciate the technical revisions that have been made to the framework and also commend the BCBS for its commitment to review the rules over time, incorporating outputs from other important regulatory initiatives, such as treatment of sovereigns and simple, transparent and comparable securitizations.“Overall, we are concerned that despite the BCBS’s reiteration not to significantly increase overall capital requirements, trading book capital will increase by 40% under the new rules based on the BCBS’s impact assessment. We worry that the rules may have a negative effect on banks’ capital markets activities and reduce market liquidity.“Further impact assessment needs to be run to assess if the gap between the standard and internal models based capital outcomes is reasonable, considering the BCBS’s future work on standardized floors.“We will be reviewing the rules in depth with our members and look forward to continued discussion with the BCBS to ensure the FRTB meets its original goals.”- ENDS -

Commenting on the publication of today’s EBA guidelines on sound remuneration policies, Michael Lever, Head of Prudential Regulation at AFME, said: “We note the publication today of the EBA’s final guidelines on sound remuneration policies and welcome the fact that the implementation of the guidelines will not take place until 1 January 2017, which will allow firms the necessary time to prepare. Additionally, we welcome the publication of the EBA's Opinion on the application of proportionality and its recommendation that legislative change should be considered in this area. We will work closely with the EBA and the European Commission in the coming months in light of the ongoing review of the CRD IV remuneration provisions to ensure that proportionality is an integral part ofthe rules going forward.” – Ends –

Commenting on statements made after the ECOFIN Council meeting today, Simon Lewis, Chief Executive of AFME, said: “We are concerned to see reports from the ECOFIN Council meeting that there is a proposal for a FTT covering equities and derivatives. As we have consistently argued, this tax would, if implemented, drive up the cost of capital throughout Europe and run directly counter to the EU's economic growth agenda – affecting jobs and investment, as well as damaging the prospects for a Capital Markets Union. We urge the EU11 Finance Ministers to abandon such an inefficient and harmful tax and to focus their energies on the Commission’s growth agenda.” – Ends –

AFME today issues a report highlighting the need for Europe to make greater use of its equity markets. “Why equity markets matter” finds that European equity markets remain under-developed, weakening the region’s economic potential, and urges policymakers to remove unintended liquidity restrictions in current regulatory proposals to foster a European equity culture. Simon Lewis, Chief Executive of AFME, said: “This is an opportune time to highlight the benefits of equity markets in Europe. The Commission has set out its plan for a Capital Markets Union (CMU) with a view to further developing and integrating capital markets to generate economic growth. We hope our report will help ensure that equity fulfils its potential as a critical source of capital.” AFME’s report concludes that the European Commission should create incentives for an equity culture in Europe in the context of the CMU, address the risks to equity markets in current regulatory proposals, and encourage greater integration of European markets. Richard Semark, Managing Director, Head of Client Execution Strategy and UBS Multilateral Trading Facility, said: “This report is a very timely reminder that a well-functioning equity market is crucial to the European economy. However, this fact is sometimes overlooked or forgotten by policy makers among their many other objectives.” European equity markets are not being used to their full potential in funding economic growth. For example, in Q1 2015, US equity market capitalisation represented 159% of GDP, whereas Europe’s was just 73.3%. If Europe’s market capitalisation-to-GDP ratio increased to 100% this could provide a capital boost to European companies of at least EUR 3.5 trillion.The AFME report explores the potential benefits of European equity markets, including not only their provision of funding for high growth sectors, but also long-term investment returns necessary to help fill the pension shortfall. Potential for growth, jobs and investor returns Growth in the European economy remains subdued and unemployment stubbornly high. However, the outlook appears to be brightening with the European Commission forecasting real GDP growth in the European Union of 1.8% in 2015 and 2.1% in 2016. Behind these figures stand European companies and employers striving to grow their businesses and create more jobs. Yet in order to return economic growth to a strong and stable footing, European companies need to make full use of all available funding options. The report is the first in a three-part series. The second report will address barriers to preventing equity markets from playing a greater part in funding business and the third will look at how to overcome these barriers. AFME’s many equities-focused committees actively support growth in market efficiency, functioning, listings and SME-focused equity raising initiatives. The report is free to download from AFME’s website – Ends –

The Association for Financial Markets in Europe (AFME) and the International Capital Market Association (ICMA) have welcomed the G20 Infrastructure and Investment recommendations made this weekend at the Antalya summit. Simon Lewis, Chief Executive of AFME, said: “The G20’s recommendations encourage infrastructure investment from governments to stimulate growth. By 2030 the gap in infrastructure spending is forecast to reach up to $20 trillion. To help bridge this gap, it will be vital to increase the role that capital markets can play in infrastructure financing.” Martin Scheck, Chief Executive of ICMA, said: “Unlocking funds for infrastructure projects relies on initiatives that help to break down barriers to investment. As such, the G20 recommendations are to be welcomed as we hope they will go some way towards addressing the market inefficiencies and legislative and regulatory disincentives which currently pose challenges to infrastructure projects.” AFME and ICMA – both representing a variety of capital market participants – are committed to supporting the expansion of capital markets financing for all types of infrastructure projects. To this end, the two trade associations published the AFME-ICMA Guide to Infrastructure Financing in June 2015. The Guide is a reference source for market participants in infrastructure financing. Addressing public authorities, project sponsors, project companies and issuers, it sets out the relative merits of bank and bond markets and describes transaction processes while taking account of planning and procurement issues and key considerations, and also sets out key considerations for investors in project bonds. The AFME-ICMA Guide can be downloaded from the associations’ websites: AFME; ICMA.

AFME welcomes the publication of the FSB's final standard on Total Loss-absorbing Capacity (TLAC). Oliver Moullin, Head of Recovery and Resolution at AFME, said: “This establishes a robust TLAC standardwhich will build upon the recovery and resolution framework now in place to ensure that the largest bankshave high levels of loss absorbing resources enabling them to be resolved without taxpayers bearing losses.” – Ends –

AFME releases first pan-EU guide on raising finance for Europe’s SMEs Europe’s SMEs are finding it difficult to raise equity capital and there is a significant lack of awareness about the funding options available to them; AFME has released the first pan-EU Guide to help SMEs identify and access funding opportunities. European small and medium-sized enterprises (SMEs) have access to nearly twice the amount of funding as their US counterparts, yet bank loans remain the most common form of SME finance in Europe. This leaves huge scope for small businesses to tap additional funding sources for loans, bonds and equities, finds new research by the Association for Financial Markets in Europe (AFME). However, many SMEs remain unaware of the options available to them. In Spain and Italy, for example – where small businesses tend to lean most heavily on financing sources, such as banks – Italian SMEs received €233 billion in loans in 2013 compared to just €1 billion in private equity capital. While in Spain, SMEs received close to €273 billion through bank loans compared to less than €1.5 billion from venture capital and private equity sources. With a view to helping European SMEs decide what type of funding their business needs, AFME has released the first pan-European guide entitled: “Raising Finance for Europe’s Small & Medium-Sized Businesses: A practical guide to obtaining loan, bond and equity funding”.The Guide provides a comprehensive overview of the financing options available, including practical tips on where and how to access funding. Simon Lewis, Chief Executive of AFME, said: “SMEs are at the heart of the European economy and are a key driver for economic growth, innovation and employment. By understanding the diverse funding sources available to them, European SMEs will be better able to grow and create employment. In this respect, we hope the Guide will help facilitate decision-making on critical funding choices.” In order to encourage European SMEs to think more creatively about their financing options, AFME’s Guide explains the main types of SME finance available, namely loans provided by banks and non-banks, bonds and equity finance. It introduces sources, such as venture capital, private equity, peer-to-peer lending platforms and crowd funding websites. It also includes an extensive directory of national and pan-European organisations and schemes which provide SME support, and offers practical case studies. The Guide also provides a comparison of stock exchange requirements and issuance data for equity and bond markets across Europe. George Passaris, head of securitisation at the European Investment Fund said: “The AFME Guide will help European SMEs make educated choices about the type of funding they need and will help to improve their chances of achieving success with loan applications and bond and equity fund-raisings. It includes a useful overview of the financing programmes available from the EIF, EIB and other European institutions to support the growth of European SMEs.” Gerhard Huemer from the EU SME Association UEAPME, who supported the work on the Guide, said: “Especially in times when many SMEs have difficulties with access to finance, this Guide helps SMEs to learn about the full range of financing sources and how to profit from them.” AFME and its wholesale capital markets members are the link between businesses of all sizes and a broad range of investors. As such, AFME is uniquely placed to gather their expertise – and that of other organisations to provide new ideas to all European companies looking to understand what type of capital they need. AFME’s support for SMEs is part of a wider collaborative effort to improve economic and employment growth in Europe, driven by the European Commission. This growth agenda includes the recently announced Capital Markets Union and the Investment Plan for Europe which includes the €315 billion European Fund for Strategic Investments. AFME members have already begun distributing the Guide to their SME clients across Europe. Raising Finance for Europe’s Small & Medium-Sized Businesses is available in English, French, German, Italian and Spanish on the AFME website. -ENDS-