This latest report from AFME and Linklaters, in collaboration with Irish law firm Arthur Cox, articulates the approach to conduct supervision taken by financial regulators in France, Germany, Ireland and the Netherlands. Focusing on conduct supervision rather than prudential supervision (particularly where one regulator supervises both) and on supervision by national competent authorities rather than the ECB, the report clarifies: who the financial services conduct supervisor is; how they supervise; the current priorities; and specific approaches taken to the supervision of key activities.

This paper assesses the EU equivalence framework for financial services and provides recommendations to further enhance its functioning. The paper considers last year’s European Commission Communication and recent developments in the EU equivalence framework. The EU’s equivalence system is one of the most widely used cross-border regimes for financial services and plays an important role by effectively regulating market access and international relationships. AFME proposes key objectives for the EU’s relationship with third countries and core principles which should underpin equivalence. It also makes a number of recommendations to further improve the functioning of the regime and strengthen relationships with third countries to ensure continued connectivity with international financial markets while effectively managing risks to financial stability, market integrity and investor protection. The paper addresses the EU’s relationship with third countries generally as opposed to the specific future relationship with the UK post Brexit.

SinceAndrew Bailey’s speech in 2017banks have had to prepare for the reality that after 2021, the London Interbank Offered Rate (LIBOR) – one of the world’s most important reference rates - might cease to exist. As part of industry preparation, regulatory authorities have been working with market participants to transition away from the use of LIBOR to risk-free rates; however, this transition also poses significant conduct risk. The term “conduct risk” can be broadly defined to mean the risk that actions taken by a firm could be detrimental to a client or have an adverse effect on market stability or effective competition. As a result, AFME and Simmons & Simmons have together highlighted questions which compliance teams should ask themselves concerning their LIBOR transition preparations in order to mitigate conduct risk. Read the paper forall the details Overview Firms should review theirstructure and governance frameworksas this will define how they approach the transition and manage their relationships with external parties and key decision-makers. Given the scale and complexity of the transition, firms should review theirrecord-keepingprocesses to ensure they remain compliant when large volumes of documents are produced. Review whether the organisation issuitably engaging with regulators and working groupsso its responses to consultations are as informed as possible. Firms should review whether their new risk-free-rate products are compliant under regulatoryproduct governance obligationsand access the viability of any new LIBOR-referencing instruments. Determine whethercommunicationsteams are suitably addressing client needs and their varying levels of understanding of the transition. Take steps to ensureoutsourced servicesare compliant with regulation. Ensure allbusiness divisions are suitably trainedand aware of the firm’s regulatory and legal obligations. Reviewpost-transition communications processesto determine if they are prepared for potential questions and complaints from clients regarding new risk-free-rate linked contracts.

AFME’s latest paper sets out fiverecommendations to deliver supervisory convergence on the regulation of crypto-assets in Europe. The paper’s recommendations are intended to encourage collaboration between regulators in Europe and work towards a common approach to the regulation and development of crypto-assets in financial services. In this paper, AFME provides an overview of the crypto-asset taxonomies and regulatory approaches in use by a sample of National Competent Authorities across Europe, outlining the areas where divergence in regulation exists. The paper finds that while there is some convergence on the methods used to classify different types of crypto-assets, there is significant divergence in the methods used to regulate crypto-assets. This creates uncertainty for market participants, which limits innovation.

Our latest paper from AFME’s Technology & Operations Division sets out 14 recommendations to help realise the full potential of public cloud computing across the capital markets industry. The recommendations for banks, cloud providers, regulators, and the industry as a whole aim to increase the transparency and collaboration required to build further confidence, trust and capability in public cloud.

Available inFrench,German,ItalianandSpanish. This second edition of AFME’s annual report tracks the progress of the Capital Markets Union (CMU) project through eight Key Performance Indicators (KPIs). It is a joint publication with ten trade associations and international organisations representing global and European capital markets stakeholders. The report includes a country-by-country comparison of individual EU Member State progress against the CMU’s objectives.This year’s report also includes a new indicator measuring how well EU countries aredeveloping their FinTech ecosystems. Key findings include: Europe strengthened its global leadership in sustainable finance - Issuance of sustainable bonds increased 16% in the EU during 2018 to €69bn, an increase of €9bn compared to 2017. The EU 27 lags behind on FinTech funding - EU27 FinTech companies have only benefited from $7.2bn in investments (venture capital, seed, angel and private equity) since 2009, compared with $120bn in the US, $23.8bn in China and $20.3bn in the UK. Europe’s reliance on bank lending has increased - European companies continue to over rely on bank lending, with 88% of their new funding in 2018 coming from banks and only 12% from capital markets – a decline from 14% on average in 2013-2017. As the EU begins a new political cycle, there is an increasing focus on the need to further develop the Capital Markets Union. While some of our report’s indicators show a positive trajectory since last year’s results, such as Europe’s global leadership in sustainable finance, it is clear that there is still much work to be done at European and national levels, particularly on making Europe’s capital markets more competitive. The 2018 first edition of the report can be foundhere.

Discussion Draft Principles Supporting the Strengthening of Operational Resilience Maturity in Financial Services

Surveillance within wholesale banks is integral to the identification and investigation of unlawful or unethical practices, such as: misconduct, market manipulation and market abuse, and financial crime. The surveillance function in financial institutions has evolved significantly over the last ten years, mainly driven by regulatory requirements and high-profile misconduct cases. Banks have, as a result, invested heavily in building their surveillance capability. However, with rapidly developing technologies and regulatory expectations, the ongoing drive to enhance the effectiveness and efficiency of surveillance must continue.

Featuring contributions from a range of distinguished industry figures such as Governor of the Bank of England, Mark Carney and European Commission Vice-President, Valdis Dombrovskis,this collection of essays assessesthe achievements of Europe’s financial industry over the last 10 years, as well as the remaining challenges for creating an integrated banking and capital market.

As we reflect on AFME’s work during the last year it is also an important moment to take stock more generally on the development of Europe’s banking and capital markets, and on thesignificant global forces driving change within wholesale finance. While there has been strong and steady progress on creating an integrated banking and capital market in Europe in recent years, there is still much more to do. At this moment of significant political change, with new leadership at the European Commission, EuropeanCouncil and European Central Bank we will continue to make the case for reducing fragmentation within Europe’s financial markets.