The Association for Financial Markets in Europe (AFME) welcomes the European Commission’s paper on Long-Term Financing of the European Economy, published today, and in particular, its acknowledgement of the important role to be played by Europe’s capital markets in funding Europe’s economic growth. The Commission’s paper notes that although bank lending has been negatively affected by regulatory constraints, the intermediary role of banks is likely to grow in importance as Europe becomes less reliant on direct bank loans as a source of financing. The Commission’s communication follows on from last year’s Green paper on long-term financing of the European economy and addresses ways to improve access to finance for Europe’s companies. Improving SME access to finance The Commission paper refers to initiatives to address SMEs’ education and information gaps through the Enterprise Europe Network. AFME’s latest funding study[1] highlights that SMEs are not fully aware of the range of government and central bank schemes at national and European levels. Improved information and communication would increase their awareness of what was available and how to access it. In addition, securitisation could play a larger role if the economics of SME loan securitisation can be restored as it is an efficient way for banks to be able to free up capital and raise cash for further lending to existing or new SME borrowers. Securitisation AFME welcomes and supports the Commission’s commitment to revive securitisation in Europe, and in particular, to consider better regulatory treatment for high quality securitisation. Since 2011, Europe has been a global leader in important regulatory reforms of transparency and risk retention, which, along with industry initiatives such as Prime Collateralised Securities, have laid the foundations for sustainable securitisation markets which meet the needs of the real economy. AFME remains strongly committed to constructive engagement with the Commission and other policymakers to this end. It is essential that this further analysis takes account of the evidence of the strong performance of high quality securitisation in Europe. Private Placement AFME supports the Commission’s identification of private placement markets as an alternative to bank lending and bond issuance. According to AFME’s funding study, large and mid-sized companies want greater flexibility in accessing finance as they need to be able to tap large pools of cash quickly, depending on market conditions. They say that certain capital markets sources of finance, such as the European private placement and high yield bond markets should be prudently expanded, which could be achieved by developing legislation as well as more harmonised EU insolvency regulations. Infrastructure funding According to AFME’s recent study, investors, such as pension funds and insurers, are cautious of highly localised practices in procurement, as well as uncertainty around future tariffs. Governments and policymakers could reassure investors by standardising national or pan-European tariff guidelines, as well as by introducing simpler planning and procurement procedures. AFME welcomes the Commission’s commitment to enabling greater standardisation and transparency in areas such as infrastructure project credit history and improving availability of transparent information and data on new Public Private Partnership initiatives. Clare Francis, Managing Director & Head of Global Corporate Banking at Lloyds Bank, and Chair of AFME’s Long Term Growth working group commented: “As growth and financing of Europe’s real economy face structural challenges, enhancements to European capital markets would be a welcome development, with banks continuing to play a key funding role. For example, an ideal world would allow corporates to able to choose between fully functioning euro, sterling and U.S. private placement markets, all with similar conventions, documentation and standards. Although we are some way off from that, this EC paper is an important move towards that goal.” Rick Watson, AFME’s head of Capital Markets commented: “There is no question that European capital markets have a key role to play in fuelling long-term growth. In order to achieve this ambition, they need to be developed so that companies can more easily access them and that means a well developed capital markets policy; one which improves education for new issuers on how to most efficiently meet the needs of capital markets investors. “The Commission’s paper represents a major step forward towards this goal by identifying areas where we can further develop Europe’s capital markets.” -ENDS-

AFME welcomes the significant progress represented by Council and Parliament reaching agreement on the Single Resolution Mechanism. “While important details remain to be finalised, this agreement achieves the essential outstanding element in creating the framework for a strong and integrated Banking Union in Europe,” said Simon Lewis, AFME Chief Executive. “It ensures that ultimate responsibility for both supervision and resolution are firmly anchored at European level. The SRM will play a vital role in reducing single market fragmentation and supporting crossborder resolution. “We look forward to seeing further details of the agreement. Only a truly integrated and effective SRM system based on the key principles of the Bank Recovery and Resolution Directive will ensure that the link between sovereigns and banks is effectively broken.” ‐ENDS‐

Washington, D.C. and London, February 19, 2014 – SIFMA President and CEO Kenneth E. Bentsen, Jr. and AFME CEO Simon Lewis, whose respective memberships are comprised of firms that engage for their clients in all aspects of the transatlantic financial marketplace, today issued the following statement on this week’s TTIP negotiations: “The TTIP meeting between EU Commissioner Karel de Gucht and USTR Michael Froman in Washington, DC this week offered the opportunity for U.S. and E.U. policymakers to enhance the financial services framework for regulatory cooperation. SIFMA and AFME are of the view that expanding opportunities for financial services providers and their clients in the transatlantic market can only be realized if TTIP includes commitments for regulatory coordination and cooperation, which are fundamental to our intertwined economies and financial markets. This week’s meeting was a critical opportunity to enhance coordination, reduce conflict and confusion, and improve the efficiency of regulations across jurisdictions. Importantly, a financial services regulatory framework between the U.S. and E.U. would facilitate and guide efforts to promote consistent high-quality regulatory standards in global markets.” The Securities Industry and Financial Markets Association (SIFMA) brings together the shared interests of hundreds of securities firms, banks and asset managers. SIFMA's mission is to support a strong financial industry, investor opportunity, capital formation, job creation and economic growth, while building trust and confidence in the financial markets. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org. The Association for Financial Markets in Europe advocates stable, competitive and sustainable European financial markets, which support economic growth and benefit society. AFME (Association for Financial Markets in Europe) promotes fair, orderly, and efficient European wholesale capital markets and provides leadership in advancing the interests of all market participants. AFME represents a broad array of European and global participants in the wholesale financial markets. Its members comprise pan-EU and global banks as well as key regional banks, brokers, law firms, investors and other financial market participants. AFME participates in a global alliance with the Securities Industry and Financial Markets Association (SIFMA) in the US, and the Asia Securities Industry and Financial Markets Association through the GFMA (Global Financial Markets Association). For more information please visit the AFME website, www.afme.eu.

The undersigned financial services trade associations released the following statement in reaction to the Transatlantic Trade and Investment Partnership (TTIP) meeting taking place on 17 and 18 February 2014 between European Commissioner for Trade Karel De Gucht and US Trade Representative Ambassador Michael Froman: “By nearly every measure, the US and EU economies and capital markets are inextricably linked. Our members and their customers benefit greatly from financial markets that are the most efficient, deep and liquid in the world. However, the regulatory frameworks for those markets have not kept up with this reality, so that there can be obstacles to providing the full range of services that clients are seeking. “TTIP would for the first time provide a process and framework – in which regulators were fully engaged – that would address existing and future regulatory issues at an early stage and make available the mechanisms to resolve, or at least mitigate, regulatory differences between countries. “Importantly, financial stability would also be strengthened through a more coherent regulatory system, while investors, firms, regulators, and supervisors would benefit from regulation that is coordinated. While not all issues will be resolved through that process, TTIP offers a venue to discuss duplicative, incompatible, or conflicting regulatory requirements emanating from different parts of the world.” Last month, the European Commission released a paper outlining a framework to ensure better coordination of transatlantic rules. The members of EFSA believe this is a useful starting point for TTIP negotiations. ‐ENDS‐

Statement from Simon Lewis, AFME CEO: Sir Richard’s report comes at a timely moment when much of the post-crisis regulatory structure is in place and the industry now needs to focus on sustainable cultural and behavioural change. There is real evidence that this is already happening but the proposals set out by Sir Richard will add an important element of measurement and public accountability which has been missing. Our members look forward to working with him and his team on the next stage of the project -ENDS-

In response to the publication of proposals by the European Commission for an EU Regulation on bank structural measures, the Association for Financial Markets in Europe (AFME) believes the need for additional EU bank structure legislation at this stage is unproven. “There is a significant risk of conflicting with broader regulatory objectives,” said Simon Lewis, chief executive of AFME. “The new proposed measures are likely to lead to an extended period of business and funding model uncertainty for European banks, investors and the wider economy. The banking industry is already undergoing significant structural change as a result of major reforms underway to strengthen the safety and resilience of banks and ensure all institutions are resolvable without threat to the financial system and the real economy or losses to the taxpayer.” In particular, the proposed measures undermine confidence in the ability of capital markets to effectively support the European economy. The prospective separation of market making and related hedging from banks’ core activities goes beyond the approach taken in other jurisdictions and would deal a major blow to the European banking model, in particular universal banking. “Europe can ill afford a diminished financial system at a time when it seeks to diversify its funding sources and develop mechanisms in support of long-term financing,” said Lewis. AFME looks forward to engaging constructively with the EU legislators and other stakeholders as these proposals are debated in the coming months and during the next EU legislative cycle. -ENDS-

The AFME Corporate Finance Committee has been briefed on the rising and continuous risk of cyber crime generally by the Government’s Task Force on Cyber Risk. The Task Force is concerned that companies and their financial advisers have been targets of cyber attacks, and that it is likely that those involved in capital raising and takeovers will be considered rich targets of such efforts in future. AFME believes that it is necessary to consider how cyber risk could be part of the due diligence process related to capital raisings and takeover bids. Accordingly, the Committee has decided to recommend to AFME members that are engaging in the relevant businesses to consider including cyber risk in due diligence checklists and, where appropriate, to discuss cyber risk with responsible board members or senior executives of the companies involved. Download the Institute of Chartered Accountants in England and Wales (ICAEW) report,Cyber-Security in Corporate Finance Read AFME chief executive Simon Lewis’ speech at the launch of the ICAEWreport, 16.01.14 -ENDS-

The agreement between the European Parliament, Council and Commission on the Review of the 2007 Markets in Financial Instruments Directive (MiFID) is a major step towards ending regulatory uncertainty while supporting the ability of Europe’s financial markets to meet the needs of investors and issuers. “This is one of the most important legislative reforms of Europe’s capital markets with the potential to enhance transparency, improve price formation, and increase fairness and confidence across a range of markets,” comments Simon Lewis, Chief Executive of the Association for Financial Markets in Europe. The agreement on the primary (Level 1) legislative texts represents a critical milestone of the Review that has been over two years in development since the Commission’s proposals were first published. Major steps forward have been made, including liquidity-sensitive transparency requirements for bonds and a regime for non-European firms that compared to the original proposals maintains more open and accessible EU markets while still protecting investors. However, AFME believes that the agreed text falls short in certain areas, such as the curtailment of execution options for equity investors and the limitations on competition and choice between clearing houses and trading venues. Significant challenges lie immediately ahead in terms of developing the regulatory detail necessary to make these primary provisions operational. The Level 1 texts envisage nearly 90 separate secondary (Level 2) measures in areas such as the conditions for deferred post-trade transparency for non-equity instruments; the conditions whereby access could be denied or granted by a trading venue; and the data standards and formats related to information that consolidated tape providers publish. “Key to reaching this point has been policymakers’ recognition of the need for careful calibration of transparency and market structure requirements that are sensitive to the liquidity of the instruments concerned and to the trading needs of investors,” said Christian Krohn, a managing director at AFME. “As more detail is mapped out, it is important that the agreed policies are implemented in way that ensures their aims are fulfilled and unintended consequences for market users are minimised.” Despite the political challenge, policymakers have broadly made key progress in areas such as nonequity transparency requirements, but in other areas, such as open access for CCPs and trading venues, more can be done to introduce much needed competition. Moreover,the double cap restrictions on the use of equities trading waivers will present significant operational challenges as Level 2 provisions are developed. AFME looks forward to engaging with European Securities and Markets Authority (ESMA), the Commission and other stakeholders as these Level 2 measures are developed to enable the MiFID Review to achieve its full potential. -ENDS-

The European Insurance and Occupational Pensions Authority (EIOPA) has announced revised Solvency 2 calibrations on capital charges needed by insurers to hold asset-backed securities. EIOPA is now proposing a reduction of the spread-risk charge for AAA-rated securitisations from 7% to 4.3%. This is significant, but not enough to make a difference for insurers investing in securitisation. However, the Association for Financial Markets in Europe (AFME) welcomes the authority’s introduction of a definition for high-quality securitisation. Sidika Ulker, a director of the Securitisation division, AFME, said: “AFME strongly supports EIOPA’s work in reviewing the capital charges for securitisation under Solvency II and, for the first time, recognising the importance of high-quality securitisations in the framework. However, we remain concerned that EIOPA’s proposed revisions to the capital charges will not be sufficient to encourage the return of insurance company investors. “A revived and renewed high-quality securitisation market, delivering funding for the real economy and with significant participation from non-bank investors such as insurance companies, is critical to help fund Europe’s recovery – particularly in those member states most affected by the sovereign debt crisis.” Read about the EIOPA proposals here.

The Association for Financial Markets in Europe (AFME) welcomes the announcement that a political agreement has been reached on the Bank Recovery and Resolution Directive (BRRD). Simon Lewis, Chief Executive of AFME said: “Agreement on the BRRD is a key part of the regulatory reform agenda. It is a crucial step that will address the issue of ‘too-big-to-fail’ and provide the authorities with the powers to ensure that all banks in Europe can, when required, be resolved in an orderly manner without resorting to taxpayer bail-outs. “Dedicated resolution authorities will now have the power to take preventative action at an earlier stage, put in place plans for dealing with any bank failure, and where necessary have the tools to conduct a resolution where losses are imposed on shareholders and creditors rather than taxpayers. “The directive also provides welcome clarity as to the framework for resolution and promotes a consistent approach across the EU. Importantly, the BRRD also facilitates cross-border resolution through the inclusion of powers to recognise and enforce resolution actions taken in countries outside the EU, and providing for the establishment of cross-border cooperation agreements between authorities.” -ENDS-