(London, UK) The Collateral Initiatives Coordination Forum (a grouping of European trade associations representing a broad range of financial market participants internationally) has called for regulatory authorities to focus on the efficient mobilisation of collateral in financial markets. The CICF makes the case that, as high quality collateral is in increasing demand to support transactions in financial markets, regulatory measures should ensure that it flows efficiently around the market, facilitating the matching of collateral sources and uses. The developments, and their sequencing, that are necessary to improve collateral fluidity are set out in a CICF White Paper published today. The importance of collateral has grown since the advent of the financial crisis in mid-2007, as both market participants and official policy makers have encouraged its use to ensure that risk in financial markets is better managed. This demand for high quality collateral will increase further following the full introduction of regulatory measures including the Basel liquidity requirements and the shift of standardised OTC derivatives to CCP clearing. Given this increasing demand and in the face of limited supply, the CICF argues that it is essential that high-quality collateral be managed as a scarce resource. Calling for an urgent focus on collateral fluidity, the CICF’s independent Chairman, Mr Godfried De Vidts, said: “The CICF is offering a vision for improvements in collateral infrastructure. Too much haste in implementing multiple regulatory changes impacting collateral will lead to adverse consequences, which are already visible through the fear of a collateral squeeze.” The CICF’s White Paper explains that the challenge is to mobilise efficiently the flow of collateral inside and between organisations, by eliminating barriers to collateral flows and the development of an efficient market infrastructure. The CICF proposes that known problems in European financial market infrastructures need to be fixed, alongside the delivery of the major technological developments to realise both T2S and the shift to a standard T+2 settlement period. Furthermore, the CICF considers that without the effective phasing of proposed changes, serious adverse consequences for financial markets, and hence the real economy, can be anticipated as a result of inadequate collateral fluidity; and urges that the industry and policymakers should work together to deliver well thought out, suitably phased measures. CICF is cognisant of the fact that collateral fluidity is one of the many important aspects of collateral. It will therefore endeavour to expand its work in other relevant areas of collateral including proposals for harmonisation and standardisation at European and at international levels. A copy of the CICF White Paper is available from www.icmagroup.org Contact: Allan Malvar, Managing Director, Head of Membership and Communications International Capital Market Association [email protected] +44 20 72130322 / +44 7738 696 451 Notes for editors Collateral Initiatives Coordination Forum The CICF is a joint trade associations’ body set up at the beginning of 2012 to facilitate appropriate coordination across the private sector of all collateral-related initiatives. Through its trade association members it represents a broad range of financial market participants internationally. Current members of the CICF are: Association for Financial Markets in Europe (AFME) Association Française des Marchés Financiers (AMAFI) European Association of CCP Clearing Houses (EACH) European Banking Federation (EBF) European Central Securities Depositories Association (ECSDA) International Capital Market Association (ICMA) International Swaps and Derivatives Association (ISDA) International Securities Lending Association (ISLA) Loan Market Association (LMA) Wholesale Markets Brokers’ Association (WMBA) For further information about the CICF please see its website pages. To aid those interested in the topic of collateral, but new to the associated concepts, the CICF is today also publishing a short primer entitled ‘Collateral Fundamentals’ available at www.icmagroup.org. Looking ahead, the CICF will consider opportunities to supplement this paper with similar papers going into further depth on more specific aspects of the overall collateral topic.

Introducing banking union in Europe will help resolve the euro crisis by strengthening the financial system and enabling it to contribute more effectively towards economic recovery, per a paper published today by the Association for Financial Markets in Europe (AFME). However, key challenges must be addressed to ensure the new banking union framework is effective and strengthens the Single Market across the EU, namely: ‐ The Proposed Single Supervisory Mechanism (SSM) needs to be finalised and implemented quickly, with clear agreement reached on all major aspects of the proposal by the end of 2012. The Paper warns that failure to agree on this timetable would risk reigniting the Eurozone crisis. Potential misalignments and systemic weaknesses could appear unless bank supervision and bank resolution (for failing banks) are developed alongside and complement each other. Under the European Commission’s proposals, bank resolution – at least for the initial phase ‐ would continue to fall within the jurisdiction of each Member State. The inevitable period of transition between establishment of the SSM and implementation of a single resolution mechanism needs to be kept to a minimum, the Paper argues. AFME’s paper on banking union also provides insight on achieving high quality and effective supervision, outlining the need for supervision to be well‐resourced and based on a clear, reliable mandate. In particular, AFME calls for supervision to have a clear focus on the assessment of the governance and culture of any firm. The paper highlights how Europe’s Single Market must not be undermined as a result of banking union and the development of a Single Supervisory Handbook is a key step towards promoting a level playing field and guarding against fragmentation. Simon Lewis, AFME Chief Executive, said: “AFME believes banking union is a vital project for Europe, which should advance market integration, strengthen financial markets and enhance confidence in the EU economy. “It is therefore essential that Europe’s leaders reach agreement as soon as possible on key aspects; that they get the detail right on vital areas like supervisory arrangements; and that they establish a clear roadmap to deal with the other integral components of banking union including the single resolution mechanism.” ‐ENDS‐

Commenting on cross border resolution plans, published today by the US Federal Deposit Insurance Corporation (FDIC) and Bank of England, Simon Lewis, chief executive of the Global Financial Markets Association (GFMA) said: “GFMA strongly supports the joint paper published today by the Bank of England and the FDIC on resolving US or UK-based G-SIFIs. No financial services firm should be ‘too-big-to-fail’ or have to rely on taxpayer support for its survival. “GFMA notes that there can be significant benefits in a whole group, single point of entry, approach where this is effective. However, as acknowledged in the paper, it is important to recognise that a single point of entry strategy may not be appropriate for all institutions - for example, where there is insufficient capital at the holding company level to absorb the required level of losses. “Resolution strategies therefore need to be tailored to the circumstances of each institution and the development of firm-specific cross-border cooperation agreements will be a key component to achieve this. We urge similar cooperation between authorities in other jurisdictions, building upon the framework established by the Financial Stability Board.” -ENDS-

Simon Lewis, Chief Executive of the Association for Financial Markets in Europe, today issued the following comment on the report of European Commission’s High Level Expert Group on banking reform: “We will study with interest the recommendations of the High‐Level Expert Group and we note Commissioner Barnier’s comment today that he will consider their impact on growth and the safety and integrity of financial services. European banking is already undergoing profound change as a result of regulatory reform and of shifts in market fundamentals. It is not at all clear that further structural reform would make the system safer or more efficient. “AFME supports the regulatory reform programme and the authorities’ aim of restoring confidence in the European financial system. But we do not believe that further changes to the structure of the banking industry are necessary or will contribute to Europe’s economic growth.” ‐ENDS‐

The Association for Financial Markets in Europe (AFME) has appointed regulatory expert and academic Eddy Wymeersch as a nonexecutive director and senior advisor. Mr Wymeersch was formerly chair of the Committee of European Securities Regulators (CESR) as well as the Chairman of the Supervisory Board of the Belgian Banking, Finance and Insurance Commission. He will join the AFME Board with immediate effect, following the Association’s Board meeting and Annual General Meeting, which took place on 19 September 2012. He is currently chairman of the Public Interest Oversight Board in Madrid and member of the board of Euroclear. He was a member of the European Corporate Governance Forum, an advisor to the Belgian Government, the European Commission and international institutions. He teaches on company law, banking law and securities regulation. Gaёl de Boissard, AFME’s chairman commented: “Europe’s capital markets are experiencing unprecedented levels of regulatory change and we are delighted to appoint someone with Eddy Wymeersch’s enormous experience of the financial markets to our Board. His expertise and understanding of the role of European policymakers, in particular, will be invaluable to us as an advisor.” Eddy Wymeersch commented: “I hope that my expertise in the financial field will benefit AFME and its members and contribute to the integration of the financial markets in Europe and worldwide. At the present juncture when so many issues are popping up, it will be necessary to develop a long-term view to stabilise the system and contribute to the growth of our economies.” ‐ENDS‐

AFME welcomes the Commission’s expanded approach to the review of Solvency II capital charges. Long term financing of the EU is an important objective and has been identified as an important consideration in the determination of capital charges of certain assets, including securitisations. We believe securitisation will need to continue to play an important role in the long term financing the real economy. The letter from Jonathan Faull, Director General Internal Market and Services, to Gabriel Bernardino, Chair of EIOPA, asking him to revisit the capital charges on securitisation, is now on the website of the European Commission at the following link: http://ec.europa.eu/internal_market/insurance/solvency/latest/index_en.htm

Commenting on the European Commission’s proposal for a European banking union, issued today, Simon Lewis, the chief executive at the Association for Financial Markets in Europe (AFME) said: “We welcome the Commission’s proposal as a vital step towards restoring confidence in Europe’s financial system and wider economy. “Creating a strong banking union, built around a credible and effective single supervisor, should break the link between the solvency of Europe’s banks and its sovereigns, which has been a significant cause of instability in recent years. “Some key issues remain to be resolved, including the implications for the Single Market; the allocation of responsibilities between the ECB and national supervisors within and outside the banking union; and the essential backstop arrangements for resolution and depositor protection. We stand ready to assist policymakers in working through the issues.” -ENDS-

Simon Lewis, Chief Executive of the Association for Financial Markets in Europe, today issued the following statement on the initiative by 11 EU member states to introduce a Financial Transaction Tax: “The initiative by 11 EU member states to introduce an FTT is regrettable. It is likely to serve as another brake on economic growth, it is a highly inefficient way of raising tax, and given the negative impact on growth it could even reduce overall tax revenues in net terms. ” ‐ENDS‐

The proposed Financial Transaction Tax (FTT) would not only reduce economic activity but would also be a highly inefficient way to raise public funds, even on the European Commission’s own assumptions about revenues likely to be raised and potential costs incurred, according to a new report from the independent economic consultants Oxera. The Commission’s assumptions concerning the proposed FTT show that the ratio of GDP lost to tax revenue gained as a result of the tax could range between 2:1 and 4:1, says Oxera. But even this is likely to be a serious under‐estimate, as reduced economic activity resulting from the tax would be expected to reduce other sources of tax revenue. Because of these effects, Oxera estimates that the real ratio of GDP loss to overall tax revenue gained could be as high as 10:1, and it restates its comment in a previous report on the FTT published in December 2011 that there is a risk that imposition of the tax could actually reduce overall tax revenues from the economy rather than raising additional revenue. The latest Oxera report was commissioned by the Association for Financial Markets in Europe and other associations[1] after the European Commission published a further analysis of the macroeconomic impact of the FTT using a new economic model. It comes amid renewed discussion of the tax by European Union finance ministers in the context of the eurozone sovereign debt and banking crisis. The Commission’s latest analysis, published in the form of seven explanatory notes on May 4, contains different estimates for the economic impact of the tax from those contained in the economic impact assessment included with the original FTT proposal last year. The explanatory notes state that the FTT is expected to reduce annual real gross domestic product by 0.28 per cent in the long term. However, Oxera argues these new estimates significantly underestimate the negative GDP impact as the Commission is ignoring a whole range of effects of the tax, for example on investment financing. Simon Lewis, Chief Executive of AFME, commented: “We have always said that the FTT is a flawed idea, which is likely to have serious negative repercussions for the European economy. We are also concerned that the political discussions on the subject are taking place without sufficiently rigorous economic analysis. This report confirms that much more debate is needed about the meagre gains expected from this tax and the significant damage it would cause to savers, investors and companies.” -ENDS‐

The Global Financial Markets Association (GFMA) today released the following statement from Simon Lewis, chief executive, in response to financial reform developments within the G20 Communiqué issued on 19 June 2012. “We welcome the G20’s continuing focus on reforming the financial sector, which has already led to significant regulatory change, including robust capital and liquidity requirements for banks and a framework for an international resolution regime. ”We also welcome the commitment of the G20 leaders to maintaining a consistent and coherent global approach, which is becoming ever more important as leading countries and regions create an increasingly complex regulatory environment. As G20 ministers continue to implement the reforms necessary to ensure a robust global financial system, we would urge them to thoroughly assess the impact on economic growth of the numerous initiatives underway in several jurisdictions.” Additional GFMA commentary on specific areas of financial reform: Legal Entity Identifiers (LEIs) “The FSB should be commended for recognizing the need for a strong central control process to ensure integrity of information in the LEI database. GFMA fully supports the establishment of a global LEI system, which could dramatically improve systemic risk management in the global financial industry. However, if the Implementation Group is to comprise only regulators, then GFMA would like to see active interaction with industry experts to ensure the system is set up in a timely and effective way. GFMA supports the FSB call to launch the LEI system by the end of this year and to be independently operational by March 2013. As the LEI system rolls out, we encourage the FSB and global regulators to utilize the industryendorsed prototype LEI utility (as provided by DTCC and SWIFT). This utility operates on a costrecovery basis and provides data that is freely available to all users, without redistribution or licensing fees.” Compensation “GFMA is concerned about proposals to set legal caps on variable compensation since it believes that attempts by legislators to set a maximum ratio between fixed and variable compensation intrudes on the important role of shareholders to determine key questions on pay and commercial strategy. Moreover, regulation should be designed to aid financial stability and economic growth. This proposal could introduce additional fragility to the European banking system by increasing banks’ fixed costs. GFMA believes that this issue requires further debate and hopes that an opportunity for this will emerge from further negotiations. “ Strengthening the Financial Stability Board “GFMA strongly supports reinforcing the role of the Financial Stability Board which will allow it to play an enhanced role in co-ordinating and harmonizing global financial regulation. Given the FSB’s enhanced role, we appreciate their recognition that there needs to be increased consultation and transparency with the private sector. This is particularly important as the growing complexity of international financial regulation could impact not only market participants, but also regulators and supervisors.” Capital Requirements “GFMA supports the strengthening of capital and liquidity requirements under the Basel III accord, and calls on the FSB to ensure the new framework is rolled out in a measured and consistent way around the globe and with consideration to the delicate balance between maintaining robust capital requirements and the ability for banks to support economic growth.” Oil Price Reporting Agencies (PRAs) “PRAs have a significant impact on derivatives and physical oil worldwide as they play an important price discovery role in oil markets and their published prices have a material impact on price formation in a market which includes financial activity. As such, we believe PRAs need to be subject to a clear and transparent regulatory framework that provides consistent treatment with similar price formation services or providers in other product areas. In addition, if PRAs are providing material execution services in a market and those services are financial in nature, they need to be subject to a regulatory framework that is consistent with those applied to other like services.” -ENDS-