The last years have seen significant acceleration in the development of DLT-based capital markets, with an uptake in DLT-based bond issuances, increasing evidence of demonstrated liquidity, and benefits throughout the security lifecycle. International and European SSA and government bond issuers have led this charge, and the market ecosystem is growing with an increasing number of investors, issuers, and other market participants adopting DLT. In this context, AFME encourages European SSA issuers to seize the opportunities of leading and shaping the capital market transformation towards DLT. In parallel, policymakers play an equally important role in ensuring that the regulatory framework fully supports the deployment of DLT in the financial sector by addressing outstanding blockers across the security lifecycle and providing digital cash solutions. This Policy Roadmap sets out an 8-point plan focusing on specific policy and regulatory changes that are necessary to enable that development and growth of DLT-based capital markets, with a focus on 1) updating the sandbox regimes in line with market momentum and 2) introducing a definitive permanent framework for DLT-based securities to maximise their economic functions, attractiveness to investors and technological benefit. The Policy Roadmap is to be read jointly with AFME’s separate recommendations for issuers (‘Issuer Roadmap’), which was published in June 2024.

The Association for Financial Markets in Europe (AFME) today published a report titled “Digital Finance in the EU – Priorities for fostering resilient, innovative and competitive financial markets”, presenting its recommendations for supporting the development of capital markets and increased access to finance for the real economy through new technologies. The report focuses on the following main areas: Unlocking the benefits of tokenisation and DLT technologies in capital markets: AFME highlights how the development of Distributed Ledger Technology (“DLT”) holds promise for unlocking efficiencies and driving growth. Payments, settlement, and securities lifecycle events may be carried out with greater safety and more efficiency; access to capital markets, through tokenised securities/assets, may be expanded to a broader set of participants. At scale, these developments would benefit the real economy. Supporting an effective data ecosystem: The EU’s proposed Financial Data Access (FiDA) framework, if designed correctly, has the potential to enhance the way banks operate, encourage innovation (including across sectors, if some provisions are met) and support a more effective and efficient data ecosystem. However, a clearer definition of the scope, stronger safeguards to ensure a level playing field and a gradual implementation are key preconditions for a workable framework. Promoting a secure and resilient EU digital finance sector: Work to ensure a successful and proportionate implementation of DORA will remain central in the coming months. Leveraging the opportunities from the use of artificial intelligence (AI): AI has the potential to transform financial services and capital markets, to make them safer, more efficient, accessible, and better tailored to consumer needs. At the same time, these opportunities require careful consideration of new risks and challenges introduced by a growing use of AI. Commenting on the report, Stefano Mazzocchi, Managing Director, Advocacy at AFME, said: “Banks have been at the centre of a profound digital transformation, a process which will continue and accelerate in the coming years. As the EU begins a new policy cycle, digitalisation of finance has the potential to support the development of capital markets. By increasing efficiency, lowering costs, boosting transparency and availability of information and allowing greater access to data, digital technologies can support the CMU project and allow greater access to capital markets both for entrepreneurs and institutions looking for funding, and generate returns for investors. With its digital finance strategy, the EU has been an early mover in this area and we look forward to continuing engagement and dialogue with all stakeholders to facilitate digital innovation”.

AFME and Linklaters have today published a new report titled 'Climate transition plans: current and emerging frameworks for the European financial services sector.’ The report is an essential primer on transition plan frameworks and guidance relevant to European banks covering international standards and developments in the UK and EU. The report also discusses trends in litigation, NGO and shareholder scrutiny related to disclosures in climate transition plans. It aims to provide a helpful reference point for navigating the increasing number of transition plan frameworks applicable to banks, covering not only the content of each of the frameworks but also their legislative timeline.

AFME is pleased to publish its new report titled ‘Scaling up and integrating EU capital markets’, outlining its vision and recommendations on the future of EU capital markets. In the report, AFME calls for a revigorated CMU which can be achieved by focussing on: increasing market liquidity, relaunching the EU securitisation market and modernising theregulatory and supervisory ecosystem. After a decade which has seen multiple initiatives put forward under two iterations of Capital Markets Union Action Plans, the role and capacity of the EU’s capital markets has unfortunately not changed substantially. An integrated and liquid European capital market is an essential element of the EU’s future competitiveness on a global stage. AFME strongly supports the fresh political momentum to advance CMU and encourages the Commission and the co-legislators to define and agree on a set of transformative measures as the time has come to deliver changes in practice.

While DLT is being adopted in different parts of capital markets, this roadmap focuses on adoption of DLT in markets for bonds issued by European sovereigns, supranational institutions and public-sector agencies. For further details, please see the following parts of the roadmap document: Part 1 – Benefits and Challenges of using DLT in Bond Markets setting out how DLT can help issuers achieve their issuance and policy objectives. Part 2 – State of the DLT-based bond markets showing the growth in DLT-based bond markets. Part 3 – DLT vs Traditional Bond Trade Lifecycle comparing the bond lifecycle in a DLT architecture to that using traditional infrastructures. Part 4 – Prerequisites and Enablers for Scaling setting out the key enablers for scaling of DLT-based SSA and government bond markets and the degree to which these are in place. Part 5 – Issuer Roadmap setting out a strategy for issuers to enter the DLT-based bond market, following 3 phases: Phase 1 - Experimentation with early-stage DLT-based issuances; Phase 2 - Scaling of DLT-based SSA and government bonds; and Phase 3 - Regular issuances in mature DLT-based markets. The Issuer Roadmap is to be read jointly with AFME’s separate recommendations for policymakers and regulators (‘Policymaker Roadmap’) to complement and enable DLT-based capital market developments, which will be published in August 2024.'

This paper looks to provide an overview of the development and objectives of the T2S project in Europe and to assess its effectiveness with regards to the enhancement of settlement efficiency, harmonisation and cost reduction in post trade processes, along with fostering cross-border investments within the European Union. TARGET2-Securities (T2S) is a single pan-European technical platform which allows for the settlement of securities transactions in central bank money, in real-time, for the same cost, and following the same harmonised procedures, even on settlement transactions involving different CSDs. T2S uses an integrated settlement model, whereby the securities and cash accounts used for settlement are located on the T2S platform, ensuring delivery-versus-payment (DvP) settlement by effecting simultaneous bookings on the securities accounts (provided by central securities depositories) and on the central bank money cash accounts (provided by central banks).

Top Hurdles to DORA implementation The Association for Financial Markets in Europe (AFME), has released its latest publication on DORA (the EU’s Digital Operational Resilience Act). This milestone regulation on risk management for financial entities is coming into effect on the 17th January 2025. With various Level 2 instruments not due to be finalised until late in 2024, industry is under severe pressure in ensuring that the operational uplifts are securely in place. This paper sets out the scale of the challenge for banks, highlighting the 5 top issues which are currently being grappled with, as part of preparing for DORA. It is clear that a proportionate and risk-based approach to enforcement and supervision will be needed, certainly during the initial phases of implementation. The report also shows that in many instances, banks are having to establish new systems and frameworks, often through manually intensive processes. This can be seen for example with the incoming Registers of Information, despite the overlap with existing outsourcing registers. At times, the ability to finalise such remediations depends on the willingness of third-party providers, who are themselves out of scope of DORA. Looking forward, it is critical that the ESAs not only finalise as soon as possible the remaining regulatory standards, but proactively plan ahead and set out a timeframe for rationalising the regulatory burden on firms, in particular removing the incoming duplication with existing EBA requirements. For further information please contact the Tech&Ops team.

The Association for Financial Markets in Europe (AFME), has today published the first edition of the ‘Capital Markets in the UK – Key Performance Indicators report’, tracking the progress of the United Kingdom’s capital markets against nine key performance indicators. This report is an extension of the sixth edition of AFME’s annual Capital Markets Union: Key Performance Indicators report, which tracks the development of the European capital markets ecosystem. The report shows a mixed picture for UK capital markets. Key strengths include; levels of corporate and SMEs funding, the continuance of the UK as a global hub for FX and interest rate derivatives, and a vibrant FinTech sector, with the UK leading across indicators such as the growth in the number of unicorns, innovation, and funding. However, despite these strengths, there are several weaker indicators. For instance, the decline in new equity listings (IPOs) is striking, with a near inactive market across 2023. This is coupled with a reduction in the number of foreign listed companies on UK markets. Looking forward, there are signs that the UK is well placed to expand and grow its domestic markets, with a large pool of underutilised capital, a high number of tech-startups, and the expansion and still further room for growth across key ESG metrics such as the issuance of green bonds. Further growth will be needed across these areas if the UK is to meet its climate goals and the competitiveness challenges that are faced by all economies across Europe. The next edition of this report, with H1 2024 data will be published in November 2024 and annual thereafter.

Download the German version of the reporthere. The Association for Financial Markets in Europe (AFME) has today published a new report on the role of capital markets in Germany.This study, published in partnership with zeb Consulting, shows the potential that stronger financing via capital markets offers for Germany. Among the key findings, the report shows that for decarbonisation efforts alone, the bar is set very high in Germany. The German government has committed to reducing greenhouse gas emissions in Germany by at least 65% by 2030, compared to 1990 levels, under the Climate Protection Act. Key findings: Germany is lagging behind other countrieswith respect to capital markets financing. German companies rely almost exclusively on bank loanswhile households still avoid capital markets for investing and retirement provision. There is anannual funding gap of EUR 175 billionneeded to achieve the German government’s ambitious climate targets by 2030. There are increasing signsviews are changingwith respect to the role of the capital markets in the German financial system. In Germany, the proportion ofcapital marketinstrumentsis significantly lowerthan in other countries, however, anequity culture is growing among young investorsin Germany. TheGerman statutory pay-as-you-go pension system is beginning to falterin the face of an ageing society. To address this challenge, a pension scheme, partly based on capital markets funding, will be essential in the future. Capital markets could help to finance future investments in Germany, including via new sources of financing, such as securitisations.

This report is part of the European Benchmarking Exercise, a market-led initiative organised by AFME, EDW and TSI, and contains results from H1–2023. Its purpose is to further enhance the quality and usefulness of disclosure in the private cash securitisation market, both ABCP and non-ABCP, in the EU and the UK, in order to assist market participants and reassure supervisors. CLOs, synthetic securitisations and public ABS bonds are not in scope. It provides aggregated transaction-level data gathered from 12 banks (BayernLB, BNP Paribas, Commerzbank, Credit Agricole, DZ Bank, Helaba, HSBC, ING, LBBW, Natixis, RBI and UniCredit) across 6 countries (Austria, France, Germany, Italy, Netherlands, and the UK) on a voluntary basis. The report shows that non-public securitisation markets are an important source of financing for the real economy. The overall private securitisation market is estimated at least €209bn of total commitments, with the exercise-related dataset covering €78bn of those commitments. Private securitisations backed by trade receivables and auto loans or leasing make up around 72% of the market, of which 34% and 87% respectively are funded through syndicated transactions. This report is the fifth in a series of such reports to be published regularly over time.