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-

Commenting on the publication of the draft Prospectus Regulation today, Simon Lewis, Chief Executive of AFME, said: “We welcome this draft proposal as it represents an important first step towards meeting the objectives set out in September’s CMU action plan. SMEs, in particular start-ups and companies seeking capital to expand, will benefit from this proposal, lowering the barriers for raising capital and stimulating cross-border funding. Significantly, the improvement of passporting arrangements will make it simpler for issuers to access markets across the EU, giving them access to a wide range of investors without creating additional costs or administrative burden.” – Ends –

The development of a simple, transparent and standardised (STS) securitisation market is a key building block of the European Commission’s capital markets union (CMU). AFME is a committed supporter of the CMU project and STS within it. Commenting on the securitisation proposals, as part of today’s announcement, Simon Lewis, Chief Executive of AFME, said: “The Commission’s proposals represent a significant step forward in restarting securitisation in Europe. There is much to welcome, in particular positive adjustments to the Basel capital hierarchy, a wider framework for short-term securitisations and better treatment for securitisation swaps. We recommend EU legislators to move forward as soon as possible on the new calibrations for Solvency II and liquidity regulation, and resolve remaining areas of uncertainty and complexity.”We also welcome: The recognition of the strong credit performance of European securitisation before, during and after the crisis. The proposed adjustment to the Basel hierarchy enabling banks to use the Standard Approach where the External Ratings Based Approach produces a result “not commensurate to the credit risk”, and other improvements to regulatory capital treatment. Harmonisation of the current fragmented due diligence and risk retention regime across different investor types. Enabling investors to place “appropriate reliance” on the STS notification undertaken by originators, sponsors and SSPEs. Technical adjustments to some of the detailed STS criteria which broaden scope and incorporate existing prudent market practices. Richard Hopkin, Head of Fixed Income, AFME said:“The Commission’s proposals deliver a strong start to the legislative process, but of course they can only be part of the answer to reviving European securitisation. AFME stands ready to work with the Commission, Member States and MEPs so that a rebuilt securitisation market can once again help deliver stronger, deeper capital markets and funding for Europe’s small businesses, homeowners and consumers.” - Ends -

The Investment Association and the Association for Financial Markets in Europe (AFME) have agreed a code of conduct for the use of 'Indications of Interest' (IOIs) The framework will enable investment managers to gauge more accurately where they can find market liquidity to get the best price for their clients The Associations are working with trading platforms and Bloomberg has already agreed to facilitate the new code The investment industry has taken a major step to improve client returns by agreeing a new code of conduct with brokers to help large share deals complete at the best possible price. The code will help to ensure that 'block trades', where large numbers of shares are bought or sold by investment managers, can be carried out with a more predictable market impact. The new framework has been agreed between the Investment Association, which represents investment managers, and AFME, the trade body that represents banks and brokers. It deals with 'Indications of Interest (IOIs)', which are used by brokers to express their willingness to buy or sell shares at a given price. The Associations will work with their members and other market participants on the buy and sell side towards the adoption of these guidelines. Under the new code, a distinction will be made between two types of IOI. Those that can be satisfied immediately, without market impact, will be labelled as 'Client Natural' and those that may involve information leakage and market impact will be labelled as 'Potential'. Bloomberg, a market leader in IOI communication, has agreed to adopt the categorisation so market participants can easily identify the class of each communication. It will extend IOI filtering so investors can determine the classes they wish to consider from each contributor. The Investment Association and AFME are engaging with other relevant vendors to ensure these options are available to all market participants. Daniel Godfrey, Chief Executive of the Investment Association, said: "The investment industry is taking a lead on improving the efficiency of equity capital markets. Our framework will limit potentially misleading market noise, allow investment managers to see where the real liquidity is and obtain the best price to the benefit of their clients." 2 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 any regulatory requirement. The new code of conduct will increase transparency in IOI categories and improve market discipline." -Ends-

The Association for Financial Markets in Europe (AFME) today published its model clause for contractual recognition of bail-in. This provides model wording designed to assist banks in complying with obligations under Article 55 of the European Union’s Bank Recovery and Resolution Directive (BRRD). The Directive requires banks to insert clauses in contracts to give effect to bail-in in a very broad range of liabilities governed by non-EU law. AFME’s new model clause is part of efforts to ensure the cross-border effectiveness of resolution and provide banks and counterparties with model drafting to assist with the significant challenges of implementation. The model clause is aimed at inclusion in debt instruments and is supported by a legal opinion. The model clause has been developed with assistance from Cleary Gottlieb Steen & Hamilton LLP and input from AFME’s members. Bail-in provisions, which come into force in most EU jurisdictions from 1 January 2016, allow a resolution authority the power to cancel, reduce, or convert into another form of security an amount owed to a creditor. The UK, Germany and France have already transposed these bail-in requirements. The clause was introduced in Brussels today during a discussion forum chaired by AFME and hosted by Cleary Gottlieb. The event included a keynote speech by the European Commission’s Patrick Pearson, Head of Unit, Resolution and Crisis Management, Directorate General Financial Stability, and panel discussions on the implementation of Minimum Requirement for Own Funds and Eligible Liabilities (MREL) and Total Loss-Absorbing Capacity (TLAC), as well as the challenges of applying Article 55 to various liabilities. Commenting on the publication, Oliver Moullin, Director, Recovery and Resolution at AFME, said: “AFME’s model clause for contractual recognition of bail-in should assist banks and counterparties with meeting the requirements of Article 55 BRRD in relation to debt instruments and support cross-border resolution. While AFME is very supportive of the objectives of ensuring that cross-border resolution is effective and the model clause should support this, we continue to have concerns regarding the breadth of the scope of Article 55 and have proposed changes that should be made to address this.” David Gottlieb, Partner, Cleary Gottlieb Steen & Hamilton LLP, said: “Cleary Gottlieb is pleased to have assisted AFME and its members in the development of a model bail-in clause for use by issuers of debt securities and capital instruments organized in the United Kingdom that are subject to the requirements of Article 55 in their liabilities governed by New York law. It is also adaptable for issuers subject to the laws of other EU Member States and for liabilities governed by the laws of other non-EU jurisdictions. The model clause is intended to be a simple and straightforward means of addressing the requirements of the BBRD as transposed in the UK and the Final Draft RTS published by the European Banking Authority in July. It also satisfies the requirements for public issuances in the United States and provides the basis for a legal opinion as to the enforceability and effectiveness of the provision under New York law, as required by the BRRD. “Aside from transferable debt instruments, it is a mammoth administrative task for banks to think about adding the bail-in clause to every single contract or agreement that creates a liability under non-EU law since it is largely what they do. The general consensus of the industry is that further legislation is going to be required to narrow the scope of eligible liabilities under Article 55.” -ENDS-

WASHINGTON, 12 August 2015 – The Global Financial Markets Association (GFMA) and the Institute for International Finance (IIF) today released a comprehensive new report from PwC on the state of global market liquidity, produced on behalf of both Associations. “The findings from our research suggest early warning signals that regulation and other market factors are contributing to a reduction in certain aspects of secondary market liquidity that is likely to be exacerbated by the unwinding of quantitative easing or another stressed market situation,” said the report’s author, Nick Forrest, Director in PwC UK’s Economics and Policy Practice. “Our analysis suggests it is important for policymakers to consider the aggregate impact of current regulation and weigh the incremental financial stability benefits of new rules against the incremental costs of diminishing market liquidity to ensure regulation is not counterproductive.” The Associations commissioned PwC to undertake a broad review of market liquidity data given the importance of liquidity to an efficient financial system and increasing concerns from market participants and policymakers regarding the impact of financial regulation on liquidity. PwC’s analysis focuses on available data regarding the tightness, immediacy, breadth and depth of liquidity and concludes that there are grounds for policymakers to review the calibration of reforms to date and the ongoing regulatory agenda, in order to properly understand the effects of regulatory initiatives by asset class, and to consider whether upcoming regulatory initiatives could likely exacerbate the trends in liquidity with no incremental benefits to safety and soundness. “Robust market liquidity is essential to efficient capital markets that can drive capital formation, investor opportunity and economic growth. PwC’s findings indicate the need for policymakers to engage in further analysis of the cumulative impact of the rules implemented before moving forward with any new rules that could impede the markets from fulfilling this role,” said GFMA CEO Kenneth E. Bentsen, Jr. “A tremendous amount of regulation has already been implemented over the past five years in response to the financial crisis. While the intent to improve financial stability is entirely appropriate, regulators must also consider the impact to market liquidity.” “PwC’s report takes an important snapshot of recent market conditions and identifies key factors that are contributing to reduced liquidity in some financial markets,” said Tim Adams, President and CEO of the IIF. “This is the beginning of an intensive effort to better understand and evaluate this complex and rapidly evolving issue and to periodically present our findings to policymakers worldwide. As the study illustrates, the cumulative impact of all recent financial reforms is not yet known. Regulators should take this opportunity to assess the total impact of recent reforms on market liquidity and consider it carefully before moving forward on any new rules.” PwC’s analysis finds that notwithstanding the benign market environment encouraged by monetary stimulus, a combination of several factors, including banks reducing risk following the introduction of new regulatory frameworks, have contributed to a measurable reduction in financial market liquidity across various asset classes. For instance, according to the report, European corporate bond trading volumes have declined by up to 45% between 2010 and 2015. Evidence suggests that block trades are becoming more difficult to execute without affecting prices. Banks’ holdings of trading assets have decreased by more than40% between 2008 and 2015, and dealer inventories of corporate bonds in the US have declined by almost 60% over the same period, finds PwC’s report. This has accompanied a decline in turnover ratios in corporate bond markets, where trading volumes have failed to keep pace with the increase in issuance. The analysis indicates an early warning that this withdrawal of dealer liquidity to date has not caused measurable economic damage due to quantitative easing programs and extraordinary monetary policy that are reducing liquidity pressures, and because market participants are adapting by trading some instruments less frequently and in smaller sizes. However, following the unwinding of QE or in a stressed environment, liquidity risks and market fragilities are likely to be revealed, potentially resulting in higher volatility infinancial markets. PwC’s report highlights the important role and underlying economics of market-making, and the roles played by different market participants which contribute to resilient market functioning, including the vital role of dealer market makers as a source of liquidity. The report concludes that it would be helpful for all stakeholders to better understand liquidity conditions and the link between regulation and market liquidity so that future regulations strike the right balance between promoting stability and maintaining financial markets liquidity. Further, it is important to review the global regulatory landscape to ensure coherence and to avoid detrimental financial markets liquidity effects or fragmentation that could disrupt the financial system. The full report, including an executive summary, is available here: http://www.pwc.com/gx/en/financialservices/ publications/financial-markets-liquidity-study.jhtml-ENDS-