Market Highlights and Commentary Market Environment Economic conditions According to Eurostat, GDP rose by 0.3% quarter-over-quarter (QoQ) in the Euro zone (EU19) and by 0.4% in the EU28 during the third quarter of 2016. The unemployment rate stood at 10.0% (EU19) and 8.5% (EU28) as of the end of September 2016, the lowest rate recorded since 2011 (EU19) and 2009 (EU28). Term Issuance and Outstanding Volumes In Q3 2016, EUR 40.2 billion of securitised product was issued in Europe, a decline of 46.5% from Q2 2016 (EUR 75.0 billion) and a decline of 30.3% from Q3 2015 (EUR 57.6 billion). Of the EUR 40.2 billion issued, EUR 16.0 billion was placed, representing 39.8% of issuance, compared to EUR 29.3 billion placed in Q2 2016 (representing 39.1%) and EUR 18.6 billion placed in Q3 2015 (representing 32.3%). For the third quarter, UK RMBS continued to lead placed totals (EUR 3.7 billion), followed by European CLO (EUR 3.4 billion) and Dutch RMBS (EUR 2.9 billion). Net issuance was negative for the third quarter of 2016, with EUR 1.24 outstanding at the end of 3Q’16, down from EUR 1.27 trillion at the end of 2Q’16. Of this, approximately EUR 699.8 billion, or 56.2%, was retained. Credit Quality In Europe, upgrades outpaced downgrades in Q3 2016 among European securitised product, with upgrades concentrated in European CLOs and prime RMBS, similar to prior quarters. ABCP Trends European asset backed commercial paper (ABCP) issuance was EUR 135.8 billion in Q3 2016, an increase of 13.1% QoQ and 35.8% YoY. Multiseller conduits continue to dominate as the largest category of issuer in the ABCP market, particularly from Ireland and France. European ABCP outstandings increased modestly from the previous quarter, ending the third quarter at EUR 16.9 billion, up by 10.5% from EUR 15.3 billion in Q2 2016.

Highlights Issuance Highlights European leveraged finance issuance (leveraged loans and high yield bonds) increased in 3Q’16 to €53.3 billion, a 2.3% increase from €52.1 billion in 2Q’16 and an 80.3% increase from €29.6 billion in 3Q’15. The quarterly surge stems from the large increase in leveraged loan issuance, which increased by 45.4% in the third quarter of 2016 while high yield bonds issuance decreased by 25.3%; the high yield bond share of the leveraged finance market decreased to 44.5%, down from 61.0% in 2Q’16 but slightly up from 44.1% in 3Q’15. Market and Economic Environment According to the October 2016 European Central Bank lending survey, in the third quarter of 2016, loan growth continued to be supported by increasing demand across all loan categories, while credit standards remained unchanged for enterprises and eased for households. The net easing of banks’ overall terms and conditions on new loans continued for loans to enterprises and households, mainly driven by margins on average loans. Competitive pressures and, to a lesser extent, lower risk perceptions continued to have an easing effect on credit standards on loans to enterprises. Across firm sizes, credit standards were eased marginally for loans to large firms and remained broadly unchanged for loans to small and medium-sized enterprises. For the large euro area countries, credit standards on loans to enterprises eased marginally in Germany, while they remained unchanged in France, Italy, Spain and the Netherlands. Credit standards on housing loans eased and were stronger than the historical average. The main reported factors contributing to an easing in standards were banks’ cost of funds and balance sheet constraints. Looking ahead to the fourth quarter of 2016, euro area banks expect a tightening of credit standards on loans to enterprises and broadly unchanged credit standards on consumer credit and other lending to households. Net demand increased for all types of loans in 3Q’16 and banks forecast a further net increase in the demand for loans in the fourth quarter. The main contributing factors for net demand for loans to enterprises in the third quarter of 2016 were the general level of interest rates and merger and acquisition activities. Net demand for housing loans continued to be driven by the low general level of interest rates, continued favourable housing market prospects and increased consumer confidence.

Highlights European systemically important banks (or EU GSIBs1)continued to improve their solvency positions during thequarter. In 3Q16, EU GSIBs achieved the largest quarterly increase inCET1 ratio since 2014, equating to an increase of c48bpsfrom 11.99% in 2Q16 to 12.47% in 3Q16. The increase in solvency ratios was largely explained by asubstantial decrease in RWAs of 4.1% QoQ. Around 42% ofthis variation can be attributed to changes in the regulatorytreatment of a large foreign operation of one bank (€108bndecrease of a total of €254bn RWA decrease of all EU GSIBsduring the quarter). Other factors such as asset disposal, FXvariations and balance sheet de-risking also contributed tothe RWA decrease during the quarter (see charts 1.4-1.6 inthe report for further detail). The decrease in RWAs illustrate the continued balance sheetrestructuring of banks to comply with CRDIV. This, in avolatile macro-environment which has not been favourablefor capital raising through marketsand as ultra-low interest rates limit a faster accumulation ofcapital through internal generation.

Highlights Equity underwriting on European exchanges accumulated a total of €26.9 bn in proceeds in 3Q 2016, a 47%decrease from the value originated in 2Q 2016 (€50.9 bn). Equity underwriting encompasses Initial Public Offerings (IPOs), convertible securities and follow-on offerings. Year-to-date (YtD), equity underwriting decreased 37% from €169 bn in the first three quarters of 2015 to €106.5 bn in 2016. Mergers and Acquisitions (M&A) of European companies totalled €180 bn in 3Q 2016, a decrease of 18.9% from the value observed in 2Q 2016 (€ 221.8 bn). In the first three quarters of 2016, M&A transactions accumulated €682bn in deal value, an increase of 9% from the same period of 2015 (€626.4 bn). Equity trading activity on European main markets and MTFs generated a total of €2.6 tn in turnover value in 3Q 2016, a decrease of 13% from the value traded in 2Q 2016 (€ 3.33 tn). On a year-to-date basis, equity turnover decreased 11% from the value traded in the first three quarters of 2015 (from €10 tn to €8.9 tn). Market capitalisation of European listed shares stood at € 11.5 tn at the end of 3Q 2016, an increase of 3.9% from 2Q 2016 (€11.1 tn) and an increase of 1.3% from the market value of a year ago (€12.4 tn).

Highlights In Q3 2016, EUR 40.2 billion of securitised product was issued in Europe1, a decrease of 46.4% from Q2 2016 (EUR 75.0 bn) and a decrease of 30.2% from Q3 2015 (EUR 57.6 bn)2 Of this, EUR 16.0 billion was placed, representing 39.8%, compared to EUR 29.3 billion placed in Q2 2016 (representing 39.1% of 75.0 EUR bn) and EUR 18.6 billion placed in Q3 2015 (representing 32.3% of 57.6 EUR bn) In Q3 2016, UK RMBS led placed totals followed by Pan European CLOs and Dutch RMBS: UK RMBS decreased from 11.6 EUR bn in Q2 2016 to 3.7 EUR bn in Q3 2016; Pan European CLOs decreased from 4.6 EUR bn in Q2 2016 to 3.4 EUR bn in Q3 2016; Dutch RMBS increased from 1.0 EUR bn in Q2 2016 to 2.9 EUR bn in Q3 2016.

Highlights Issuance: European leveraged finance issuance (leveraged loans and high yield bonds) increased in 2Q’16 to €52.1 billion, a 22.0% increase from €42.6 billion in 1Q’16 and a 6.5% decrease from €55.7 billion in 2Q’15. The quarterly surge stems from the large increase in high yield bonds issuance, whichincreased by 195.6% in the second quarter of 2016 while leveraged loan issuance decreased by 36.3%; the high yield bond share of the leveraged finance market increased to61%, up from 25.2% in 1Q’16 and up from 54.8% in 2Q’15. Market and Economic Environment: According to the July 2016 European Central Bank lending survey, in the second quarter of 2016, improving loan supply conditions for enterprises and the continued increase in loan demand across all loan categories suggested an ongoingrecovery in loan growth. The net easing on credit standards for loans to enterprises in 2Q’16 was stronger than the historical average calculated over the period since the start of the survey in 2003. Competition remained the main factorbehind the net easing of credit standards on loans to enterprises while risk perceptions and banks’ reduced cost of funds contributed only marginally to such easing. Issuance: Leveraged Loans: Leveraged loan issuance, including first lien, second lien, and mezzanine financing, decreased in the second quarter of 2016 to €20.3 billion, down 36.3% q‐o‐q (€31.9 billion in 1Q’16) and 19.2% down y‐o‐y (€25.2 billion in 2Q’15). Issuance: High Yield Bonds: Primary high yield issuance in 2Q’16 totalled €31.8 billion on 55 deals, a 195.6% and 4% increase by euro amount, respectively, from 1Q’16 (€10.8 billion on 22 deals) and2Q’15 (€30.5 billion on 58 deals). High yield bond issuance increased in both developed and emerging market Europe in the second quarter of 2016. Returns & Credit Quality:The U.S. HY Distressed Index led returns in the second quarter of 2016 with 21.6% followed by Global Fallen Angel HY Index (6.5%) and U.S. HY (5.9%). Nineteen out of 20 assetclasses examined recorded positive returns while Euro HY CCC and lower rated bonds (‐0.8%) recorded losses in 2Q’16.

Highlights European systemically important banks (or EU GSIBs 1) have continued to improve their solvency positions notwithstanding the challenging market environment of the first half of the year. In 1Q16, the unfounded concerns on the capacity of some banks to service AT1 coupon payments hit bank valuations and contingent-convertible (CoCo) prices. The market volatility episode was short-lived, with CoCo prices and option-adjusted spreads swiftly recovering during the second part of 1Q16. In 2Q16, European equity prices fell in the aftermath of the UK referendum result, with European bank share prices falling by c21% in the two days after the referendum result was confirmed. European banks endured two real-life stress tests in less than six months, in the context of ultra-low interest rates and increased net-interest margin pressure. Yet, banks continued to improve their solvency positions via a combination of balance sheet restructuring and a build-up of capital buffers.

In Q2 2016, EUR 74.5 billion of securitised product was issued in Europe1, an increase of 30.9% from Q1 2016 (EUR 56.9 bn) and an increase of 49.3% from Q2 2015 (EUR 49.9 bn)2 Of this, EUR 29.1 billion was placed, representing 39.1%, compared to EUR 14.3 billion placed in Q1 2016 (representing 25.1% of 56.9 EUR bn) and EUR 28.4 billion placed in Q2 2015 (representing 56.9% of 49.9 EUR bn) In Q2 2016, UK RMBS led placed totals followed by German Auto ABS and Pan European CLOs: UK RMBS increased from 5.8 EUR bn in Q1 2016 to 11.6 EUR bn in Q2 2016; German Auto ABS increased from 0.65 EUR bn in Q1 2016 to 4.6 EUR bn in Q2 2016; Pan European CLOs increased from 2.6 EUR bn in Q1 2016 to 4.6 EUR bn in Q2 2016.

Highlights Equity underwriting on European exchanges accumulated in 2Q 2016 a total of € 50.7 bn in proceeds, an increase of 76% from the value originated in 1Q 2016 (€ 28.7 bn) and a decrease of 18% from the value of 2Q 2015 (€62.1 bn). Equity underwriting encompasses Initial Public Offerings (IPOs), convertible securities and follow-on offerings. Mergers and Acquisitions (M&A) between European companies1 totalled € 51.8 bn in 2Q 2016, a decrease of 68% from the value observed in 1Q 2016 (€ 164.7 bn) and a decrease of 50.1% from the volume of 2Q 2015 (€ 103.9 bn). Equity trading activity on European main markets and MTFs accumulated in 2Q 2016 a total of € 3.0 tn in turnover value, a decrease of 8.9% from the value traded in 1Q 2016 (€ 3.33 tn) and a decrease of 9.1% from the value traded in 2Q 2015 (€ 3.33 tn). Market capitalisation of European shares stood at € 11.2 tn at the end of 2Q 2016, a decrease of 1.8% from the value observed in March 2016 (€ 11.4 tn) and a cumulative decrease of 10.2% from the market capitalisation in June 2015 (€ 12.4 tn).

Market Highlights and Commentary Market Environment Economic conditions According to Eurostat, GDP rose by 0.3% quarter-over-quarter(QoQ) in the Euro zone (EU19) and by 0.4% in the EU28 duringthe second quarter of 2016. The unemployment rate stood at10.1% (EU19) and 8.6% (EU28) as of the end of June 2016, thelowest rate recorded since 2011 (EU19) and 2009 (EU28). Term Issuance and Outstanding Volumes In Q2 2016, EUR 74.5 billion of securitised product was issued inEurope, an increase of 31.0% from Q1 2016 (EUR 56.9 billion) andan increase of 49.2% from Q2 2015 (EUR 49.9 billion). Of the EUR74.5 billion issued, EUR 29.1 billion was placed, representing39.0% of issuance, compared to EUR 14.3 billion placed in Q12016 (representing 25.2%) and EUR 28.4 billion placed in Q22015 (representing 56.8%). For the second quarter, UK RMBS continued to lead placed totals(EUR 11.6 billion), followed by German auto (EUR 4.6 billion) andEuropean CLO (EUR 4.6 billion). Notably, the first peer-to-peer /marketplace lending securitisation appeared in Europe, a UK SMEdeal comprised of loans funded through the Funding Circleplatform. Net issuance was positive for the first time since the third quarterof 2014, with EUR 1.271 outstanding at the end of 2Q’16, up fromEUR 1.267 trillion at the end of 1Q’16. Of this, approximately EUR733.7 billion, or 57.7%, was retained. Credit Quality In Europe, upgrades outpaced downgrades in Q2 2016 amongEuropean securitised product, with upgrades concentrated inEuropean CLOs and prime RMBS. ABCP Trends European asset backed commercial paper (ABCP) issuance wasEUR 120.1 billion in Q2 2016, an increase of 25.3% QoQ and 16.7% YoY. Multiseller conduits continue to dominate as thelargest category of issuer in the ABCP market, particularly fromIreland and France. European ABCP outstandings decreasedslightly from the previous quarter, ending the second quarter atEUR 15.3 billion, down by 14.7% from EUR 17.9 billion in Q12016.