The Association for Financial Markets in Europe (AFME) announces that Tanguy van de Werve has been appointed as Managing Director, Advocacy and Head of its Brussels office. Simon Lewis, Chief Executive of AFME said: “We are delighted that Tanguy van de Werve is joining AFME in thisvital role in Brussels. He combines a deep knowledge of the financial services industry and European institutions with direct experience of European membership organisations. “We are at a turning point as post-crisis regulation is re-shaping Europe’s capital markets with the aim of fostering economic and employment growth across Europe. AFME’s Brussels office has developed a significantpresence since 2011 and Tanguy will have an important role to play in taking our advocacy work forward.” Tanguy has over 20 years experience in a range of different financial services roles in Brussels. For the past nine years he has been Director General of Eurofinas, representing specialised consumer credit providers, andLeaseurope, representing the leasing industry. Prior to this, Tanguy worked at the European Banking Federation as Head of Financial Markets and Banking Supervision and as member of the EBF management committee. Tanguy’s previous roles include that of Senior Consultant in the Financial Services practice at Landwell (now PwC Legal) and Financial Markets Legal Adviser at Dexia. -ENDS-

Commenting on the consultation announced by the European Commission which will review the Capital Requirements Directive (CRD IV) and Regulation (CRR) on bank lending to the economy, Simon Lewis, Chief Executive of AFME, said: “We welcome Commissioner Hill’s announcement on the launch of a public consultation on CRD IV with a focus on the unintended consequences of post-crisis bank regulation. We are particularly encouraged that special consideration will be given to the financing for small and medium-sized businesses and infrastructure projects, which are key drivers for economic growth in Europe. “The post-crisis regulatory agenda is still evolving, with the Basel Committee currently re-writing the rules on the global prudential framework. We therefore believe that the Commission’s review is very timely. It should help shape the design and calibration of the final framework to avoid creating obstacles to growth. “AFME will work with its members to provide constructive input to the consultation.” -ENDS-

Commenting on the measures announced today in the UK Budget, Simon Lewis, Chief Executive of AFME, said: “We welcome that the UK Government is listening to requests to set out a long-term roadmap for the taxation of banks, and that the distortive impact of the bank levy will be reduced. We note however that the Budget announcement of a new tax on the banking sector still marks a further overall tax increase.” -ENDS-

Commenting on the publication today of the PRA’s Supervisory Statement SS28/15 on Strengthening Individual Responsibility in Banking, as well as its Policy Statement PS16/15, and on the FCA’s final rules and consultation paper CP15-22 on the same subject, Simon Lewis, Chief Executive of AFME, said: “AFME has consistently expressed its support for measures designed to continue the improvement of culture and ethics in the financial markets, including the FCA/PRA proposals to strengthen bankers' individual responsibilities. “We welcome the fact that the regulators have accepted a substantial number of the points we have made in earlier consultations. But a number of key points have not been taken on board. In particular, it is questionable whether the allocation of individual responsibilities is both proportionate, and also accurately reflects the way in which large international banking groups are governed. “We still await the detailed proposals relating to foreign banks' UK branches, and the proposed further consultations on various important matters, including regulatory references, which have come out of the Fair & Effective Markets Review. “All this will take time, and the current planned implementation programme is now even more challenging than previously. We would urge the regulators to continue to work together, and with banks, to establish final fair and effective rules in good time, so as to enable all staff to undergo the appropriate training and be clear as to their responsibilities. 7 March 2016 may no longer be a realistic commencement date for this key new regime.” -ENDS-

Commenting on the consultation launched today by the European Securities and Markets Authority (ESMA) regarding the implementation of the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR), Christian Krohn, Managing Director at the Association for Financial Markets in Europe (AFME), said: “ESMA's proposals in this consultation raise numerous issues - one being the likely impact on fixed income markets. We are concerned the proposals could impact these markets’ liquidity, increase investor costs and make issuance of debt more expensive, and we hope to continue to engage with policymakers to ensure MiFID II will not be an obstacle to the growth agenda of the European Commission.” “For example, ESMA proposes to define a large number of instruments as liquid, although the majority of fixed income instruments trade highly infrequently, and it is a key component of ESMA’s mandate to assess liquidity. “While we support the introduction of transparency requirements, these need to be carefully tailored to the specifics of those markets to avoid disruption and broader impacts on investors and issuers.”

Capital markets union (CMU), a flagship initiative of the new European Commission, should focus on increasing the share of capital markets financing in the EU by creating an open, efficient framework for all types and sizes of corporate issuers and investors, argues AFME in a policy paper published today. To succeed in this task, CMU should examine legislative and regulatory issues, market impediments and business practices in the EU in order to identify a limited number of high impact initiatives to boost Europe’s capital markets, the paper says. An agenda for capital markets union outlines practical measures and a set of firm targets which AFME suggests should guide the work of the Commission on CMU over the next 5 years. Commenting on the publication, Simon Lewis, Chief Executive of AFME, said: “The capital markets union initiative must focus on outcomes by growing markets, reducing costs and offering more financing options for businesses across Europe. We are proposing a set of firm, measurable 5-year targets to guide the project and we would encourage the Commission to adopt a targeted programme with a limited number of new initiatives, each designed to deliver the maximum economic impetus.” Proposed five-year goals for capital markets union AFME proposes that a central goal for CMU should be to increase the overall share of debt financing from the capital markets in Europe from 25% of the total currently to at least 35%. This should be achieved without further reducing the ability of Europe’s banks to provide credit to the real economy. We also encourage the Commission to consider setting objectives for specific product markets; for example: increasing Europe’s stock market capitalisation from around 75% of GDP currently to 100% of GDP, as the Federation of European Securities Exchanges has proposed; at least doubling European issuance volumes of securitisation and private placement by encouraging greater participation by both bank and non-bank investors; and increasing the share of capital market funding of SMEs, through both equity and debt. An action plan targeting issuance, investment and market infrastructure The AFME policy paper outlines have highlighted three complementary objectives to drive action on CMU: Developing more efficient and liquid markets for equity and debt issuance:Industry initiatives on high quality securitisation and private placement should be complemented by review of applicable regulation, especially capital requirements, as well as the Prospectus and Takeover Directives; and by review of the tax regime for SME equity. Harnessing long-term savings to promote investment: The priority reforms from an AFME perspective are to: appropriately calibrate the capital framework for institutional investors (particularly Solvency II); to achieve greater harmonisation of EU insolvency rules; to maintain an economically viable model for capital markets research; and to widen product choice for investors. Promoting open, integrated capital markets infrastructure: The priority reforms from an AFME perspective are to: achieve closer integration of clearing and settlement systems; pass a new securities law to clarify collateral ownership; remove barriers to cross-border collateral use; and ensure broad and affordable access to market data. A summary table is provided below, outlining the main measures proposed in the AFME paper and highlighting near-term priorities for CMU and long-term cross-cutting reforms. An agenda for capital markets union is available hereon the AFME website. -ENDS-

The EU’s proposal for Bank Structural Reform (BSR) is likely to trigger a significant increase in the cost of market funding for banks, according to a PwC report commissioned by the Association for Financial Markets in Europe (AFME). Market liquidity would be reduced and costs would rise for market users such as companies and pension funds with a negative impact on economic growth and job creation, Impact of Bank Structural Reforms in Europe argues. Simon Lewis, Chief executive of AFME, commented: “We call on policymakers to carefully consider the negative consequences of the proposal and its consistency with other policy objectives. BSR as currently envisaged runs directly counter to the European Commission’s goals of creating deep, liquid capital markets to support growth in Europe while maintaining a healthy banking system.” The Report shows that the cost of separating banks would be substantial, with an estimated total annual cost for all EU banks affected of €21.2 bn. By far the largest element of this would result from higher funding costs averaging around 75bp. This is due to lower credit quality of the separated entities, primarily resulting from the loss of diversification benefits that previously accrued from being part of a larger single banking group. The analysis further shows that very large European banks no longer benefit in their market funding costs from an implicit subsidy suggesting that they cease to be regarded as “too big to fail”. This clearly owes much to the substantial regulatory programme that has been developed post the financial crisis and the proactive response of banks in implementing major structural and operational changes. Based on the cost projections, and the absence of any mitigating actions, bank group-level returns could fall by 2 percentage points on average as a result of structural reforms and by 14 percentage points for standalone investment banking and trading activities. This would lead to negative returns for the separated trading entities of 7 banks out of the 18 included in the study and likely prompt market exits. This in turn would lead to a concentration amongst market makers and further impact secondary market liquidity, leading to higher cost for borrowers. In particular we estimate that: Corporates would be subject to a 25% increase (30bps) in their typical borrowing spread (currently 125 bps) on debt issued through capital markets Investors in European corporate debt would be subject to higher trading costs (12bps), lowering their returns and leading to up to €82 bn in losses on corporate bond holdings Please contact us to get a copy of Impact of Bank Structural Reforms in Europe, or go to the reports page on the AFME website, seelink. Note to editors: In January 2014, the European Commission published a proposal for a new regulation on structural reform of the EU banking sector. Two main requirements of the proposal are the potential economic separation of trading activities that meet certain metrics and the prohibition of proprietary trading. -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.

Commenting on the entry into force of the Single Supervisory Mechanism (SSM) today, Simon Lewis, Chief executive of the Association for Financial Markets in Europe (AFME), said: “AFME and its Members welcome today’s start of the Single Supervisory Mechanism (SSM). This marks an important moment in what has been a remarkable phase in the development of Europe’s bank supervisory architecture. “As a central component of Banking Union, the SSM should make a major contribution to the further integration of Europe’s financial markets, to securing the stability of the Eurozone, and to fostering economic growth. The SSM has the potential to enhance the quality and consistency of cross-border supervision in Europe. “It is important that the establishment of the SSM contributes to more integrated financial markets across Europe as a whole, and not just in the Banking Union area. To this end, it is essential that the European Banking Authority (EBA) continues strongly with its work to achieve convergence of the practices of the ECB and national supervisors – including through the development of a European Supervisory Handbook.” -ENDS-

Commenting on AFME’s response to the FCA and PRA consultation paper on “Strengthening accountability in banking: a new regulatory framework for individuals”, Simon Lewis, Chief executive of the Association for Financial Markets in Europe (AFME), said: "AFME supports measures designed to improve culture and ethics in the financial markets, including the new FCA/PRA proposals to strengthen bankers' individual responsibilities. "We do think, however, that the proposals relating to foreign banks' UK branches; responsibility of nonexecutive directors; certification by firms of individuals, including those outside the UK; and conduct rules for non client-facing individuals need to be carefully thought through. "We would urge the regulators to continue to work together, and with banks, to establish clearer rules, so as to enable all staff to undergo the appropriate training and be clear as to their responsibilities. All of this will take time, and the current planned implementation programme is extremely challenging." -ENDS-