Today, the Association for Financial Markets in Europe (AFME), together with international law firm, Simmons & Simmons, has published the second in a series of papers, entitled ‘LIBOR Transition: Managing the Conduct and Compliance Risks – Client Communications’. The latest paper in the series provides practical guidance to Senior Managers and Legal and Compliance teams on managing conduct risks related to client communications posed to firms engaged in the transition away from the London Interbank Offered Rate (LIBOR) to alternative rates. The paper focuses on considerations for client communications – from establishing an effective strategy through to monitoring and record-keeping. The first paper, published in December 2019, identified ways in which firms can seek to mitigate the key conduct risks posed by LIBOR transition when establishing their governance structure. Rather than offering a prescriptive checklist that may only apply to a handful of firms, the paper takes a broader view, basing the guidance on the fundamental understanding that different firms will be impacted by the LIBOR transition in different ways. Richard Middleton, Managing Director, Head of Policy at AFME, said: “Client communications and awareness are key to delivery of firms’ LIBOR transition plans. Firms will need to focus on the broad range of client needs and the end-to-end user experience, as well as considering how the current COVID situation may have impacted their transition timeline.” LIBOR Leads Penny Miller and Caroline Hunter-Yeats at Simmons & Simmons, commented: “Client engagement on the LIBOR transition will differ for every firm and this paper provides practical guidance for firms on their approach to client communications and, with the help of the AFME committee members, we have provided questions that firms should consider when planning their client communications .” Download the paper here – Ends – AFME Contacts Patricia Gondim Interim Head of Media Relations [email protected] Direct +44 (0)20 3828 2747

At its June Board meeting yesterday, the Association for Financial Markets in Europe (AFME) approved the application of Santander and Standard Chartered Bank to join its Board. Both banks have been members of AFME since its creation in 2009. They join 22 other leading European wholesale banking groups on AFME’s governing body. Adam Farkas, Chief Executive Officer, at AFME, said: “I am delighted to welcome two major global banks, Santander and Standard Chartered Bank, to the AFME Board. They each bring a deep and diverse range of experience drawn from different parts of the banking sector and across different countries, which will provide valuable input to AFME. In particular, their knowledge and expertise of European markets will contribute to further strengthening AFME’s pan-European focus. We look forward to working with them as AFME continues its work advocating for stable, competitive and sustainable European financial markets that support economic growth and benefit society.” Jose Manuel Colina, Head of Global Markets, Europe and Asia, at Santander, said: “As a leading player in the European banking sector, Santander is committed to developing an effective Banking and Capital Markets Union in Europe. Our approach to banking is to help people and businesses prosper. We have extensive experience working with AFME and would like to contribute to its expertise in wholesale banking and other key areas, such as prudential regulation, digital transformation and sustainable banking. Santander is very pleased to become a member of AFME’s Board, which will enable us to further support the development of the European Capital Markets Union.” Clare Francis, Regional Head of Global Banking, Europe and CEO at Standard Chartered UK, said: “We are proud to be joining the AFME board. As a leading international banking group, being part of an association which advocates for integrated European capital markets, aligns with our ambition to facilitate business, linking clients, markets and products to enable trade and investment. I look forward to working with the other members of the board.” -ENDS-

Following the publication of the final report today by the High-Level Forum on Capital Markets Union, Pablo Portugal, Managing Director for Advocacy, said: “The economic shock generated by the Covid-19 pandemic has amplified the need for deep and well-integrated capital markets in the EU in virtually every area. As Europe faces its deepest ever economic recession, it is clear that a robust post-pandemic recovery and sustainable long-term growth cannot solely be funded through government support programmes and the provision of bank loans. The High-Level Forum’s report therefore comes at a key moment and identifiesmany of the measuresthat need to be implemented to ensure the full potential of the Capital Markets Union can be fulfilled for the benefit of Europe’s businesses and citizens. “The question now is whether policymakers will seize this opportunity and generate the momentum to undertake the reforms needed to overcome deep-seated inefficiencies and legal impediments to capital markets integration. The hope is that all parties will see the vast potential of a fully-fledged CMU in aiding economic recovery and supporting sustainable growth across the EU. The report’s 17 sets of measures and detailed recommendations provide a rich and valuable contribution to the next phase of the CMU.” AFME strongly supports the following policy recommendations contained in the report: Placing equity markets and retail investors at the heart of the CMU: the report rightly emphasises the importance of equity in corporates’ funding mix. Well-designed measures to make equity risk-capital and public listings more attractive to businesses, in particular to SMEs, will be vital to this aim. Another vital aim must be to support a wide diversity of trading mechanisms and well-calibrated rules that support market liquidity and improve outcomes for end-investors. While the report did not make recommendations in this area, it will be important to address key inefficiencies in equities trading regulation in a future review of MiFID II/MiFIR. Recommendations to grow retail investor participation, such as introducing auto-enrolment into employee pensions, have the potential significantly to grow the pool of investable capital in several Member States. Reviewing the EU securitisation regulatory framework, to improve the functioning of this vital mechanism for Europe’s capital markets. Policymakers must now prioritise the adjustments recommended by the HLF to ensure that Europe can benefit from well-functioning securitisation markets and the possibilities offered by the “best in class” Simple, Transparent and Standardised (“STS”) securitisation label. Improving efficiency and connectivity in EU securities markets: we strongly support recommendations to address fragmentation and inefficiencies in withholding tax collection procedures, insolvency frameworks and divergent legaldefinitions as these issues stand in the way of cross-border investment. However, we regret that the HLF was not able to reach a consensus on delaying the implementation of the mandatory buy-in requirement under CSDR and making it optional. A blog post outlining AFME’s full response to the HLF Report can be found on the AFME website. -ENDS-

Following the vote in the ECON Committee today, Michael Lever, Head of Prudential Regulation at AFME, said: “AFME welcomes the changes to the Capital Requirements Regulation in response to the Covid-19 crisis. This was achieved in record time and should allow banks to take advantage of the proposed changes in their Q2 figures, if formally adopted as planned during the 19 June plenary session. “Together with other previously announced measures of supervisory flexibility, these changes free up significant amounts of banks’ capital, helping them to fulfil their vital role of speedily channelling funding to where it is most needed. “With Europe facing an unprecedented economic challenge, the exact funding needs of the economy are very difficult to estimate at this stage. It is crucial therefore that the prudential framework is closely monitored to ensure sufficient capital headroom for banks and to maximise the opportunities for both lending and market-based refinancing solutions to support the recovery. “In time there will also be lessons to be learnt from how regulators and other bodies responded to this crisis. For example, the differences between the scale and nature of the assistance that has been provided to the economy in different jurisdictions, and the variations in the regulatory treatment applied to such assistance should be reflected on. This will be necessary to ensure that such differences do not exacerbate market fragmentation or otherwise lead to an unlevel playing field among European and global banks.” -ENDS-

Following the Communication by the European Commission today on an Action Plan for a comprehensive Union policy on preventing money laundering and terrorist financing, Richard Middleton, Head of Policy, at AFME, said: “AFME believes that a comprehensive, harmonised and robust anti-money laundering and counter terrorist financing framework is indispensable in the fight against financial crime in the EU. “The most effective way to prevent financial crime in Europe is better cooperation and information sharing between financial institutions, supervisory authorities and law enforcement, both within and across Member States. In short, Europe needs to develop a public-private ecosystem to prevent financial crime.” -ENDS- Notes to Editors: AFME has also published a discussion paper with more detail entitled “Enhancements of the EU’s legal framework to strengthen the fight against money laundering and terrorism financing”

In response to the Commission’s proposal today to make targeted amendments to the Capital Requirements Regulation (CRR) to provide temporary relief to banks in the context of the Covid-19 crisis, Michael Lever, Head of Prudential Regulation at AFME, said: “The banking industry has a key role to play alongside and in partnership with governments in helping to mitigate the negative economic consequences arising from Covid-19. It is therefore essential that banks are equipped to fulfil this role so that funding quickly gets where it is needed and markets continue to function without major disruption. “We strongly support the measures contained in today’s fast-track proposal, which should help towards achieving this goal and should be concluded as rapidly as possible. However, more needs to be done to mitigate the impact of Covid-19 on businesses and the economy. “In particular, some assessments of the capacity that has been freed up may be overestimated because they do not consider the reality of market pressures, or the full range of prudential constraints banks have to respect. It is therefore important that co-legislators now consider further targeted and time limited changes to the framework. These are likely to be needed to assist borrowers, markets and the economy. In particular, full capital relief for Covid-related state guarantees must be provided across all metrics of the framework and further, strictly temporary, exclusions from the leverage ratio exposure measure may well be necessary. “Co-legislators should also not forget the impact of the additional bank lending on MREL requirements. Finally, small changes to market risk regulations are needed to ensure EU supervisors have the flexibility allowed under the current Basel Agreement. “Many of these proposed changes have already been adopted by other jurisdictions in recognition of the benefits that they bring through enhancing the capacity of their banks to support their customers and market functioning through this crisis. Europe should not delay in following suit.” -ENDS-

AFME has today published new research on the initial impact of COVID-19 on Europe’s capital markets. The report analyses the recent trends during the current abnormal market circumstances. Julio Suarez, Director of Research at AFME, said: “Overall, while prices and spreads have shifted considerably, European capital markets have continued to operate well following the outbreak of COVID-19, with liquidity ranging from very good to mixed, depending on the sector. In fact, there have been record volumes of new issuance in certain sectors. Our data also shows that banks operating in Europe are well-positioned from a solvency and liquidity perspective to support households and businesses during this period of abnormal economic pressure.” Key findings: Issuance of investment grade corporate bonds surpassed EUR 50bn in the first week of April; this amount was also the highest weekly amount ever issued in Europe. French companies have been particularly active in this respect. This is remarkable, given that many, if not most, financial market participants are working remotely. Non-financial corporates have also rapidly increased secondary equity offerings in an effort to raise cash buffers and withstand business closure for several weeks. Markets are more volatile than a few months ago, which has made it costly for some companies to list through IPOs. IPO issuance on European exchanges has declined 83% compared to a year ago. Markets have been playing their role in providing liquidity and price formation, contributing to capital allocation and helping investors manage their portfolios. Equity trading has surged 94% year on year in March-20, corporate bond trading increased 31% year on year, and FX trading rose 61% year on year in March-20. The rapid increase in securities trading and post-trade activity has been carried out without any major disruption from a business continuity perspective. Securitisation secondary markets have suffered disproportionate reductions in liquidity due to central bank support which is more limited in scope and slower and more difficult to access than for other fixed income sectors. Banks operating in Europe are well-positioned from a solvency and liquidity perspective to support households and businesses during this period of abnormal economic pressure. The report also summarises AFME’s approach to COVID-19 and the areas AFME have been focusing on to ensure that markets remain well-functioning and liquid in light of the recent impact of the coronavirus. -ENDS-

In response to the announcement by the Pre-Emption Group (PEG) today, Gary Simmons, Managing Director of High Yield and Equity Capital Markets, said: “The recent social and economic restrictions placed on businesses to stop the spread of the COVID-19 virus has had a significant impact on UK businesses and markets. AFME’s Equity Capital Markets group therefore welcomes today’s statement by the Pre-Emption Group to temporarily relax the guidelines relating to pre-emption in issuances by companies of up to 20% of their issued share capital during this period of unprecedented market turbulence. This follows an initial suggestion by AFME’s Equity Capital Markets group to the Pre-Emption Group to take a pragmatic and flexible approach regarding the fact that certain companies will likely need to raise capital very quickly, and within limited marketing windows. AFME recommends that its members follow the guidance in the PEG statement, given that the announcement is consistent with the objectives of the AFME ECM Board.” -ENDS-

Responding to the EBA’s statement on the application of the prudential framework regarding Default, Forbearance and IFRS9 in light of COVID19 measures, Michael Lever, Head of Prudential Regulation at AFME, said: “The EBA’s statement brings helpful clarifications on how banks should approach provisioning requirements in cases where customers have received forbearance in respect of their obligations under public or private moratoria. The EBA’s guidance on appropriate measures concerning the protection of consumers and the orderly function of payments services across the EU is also welcome as is the delayed timetable for open consultations and public hearings. “However, it would also be helpful to receive advice on how firms are expected to deal with the procyclicality effect on the prudent valuations of assets and clarification of the EBA’s timetable regarding its internal model repair programme. “This proactive approach by the EBA in providing useful clarifications on a number of important practical matters will help banks to confidently and speedily provide the relief their customers need. It will also ensure that valuable operational resources are not unnecessarily diverted away from meeting this key objective.” -ENDS-

Following announcements by EU and UK regulators today granting regulatory flexibility in response to the COVID-19 pandemic, Adam Farkas, Chief Executive of AFME, said: “In light of the unprecedented COVID-19 situation across Europe, banks are currently focusing on managing business continuity issues and are rightly prioritising the need to provide liquidity and manage market risks. “We therefore welcome the regulatory flexibility shown by ESMA and the FCA today in response to the imminent implementation of the tick size regime. Implementing major systems changes across multiple firms’ trading technology infrastructure at a time of heightened market volatility would introduce unnecessary operational risk, so we very much welcome the prompt action shown today.” -ENDS-