Download Infographic here. AFME outlines the regulatory framework needed to support banks as they adopt new technologies such as crypto-assets, artificial intelligence and cloud computing, harness the value from data, and address the challenges of cybersecurity and operational resilience. The “European Capital Markets in the Digital Age” paper calls on the European Commission to promote innovation, competitiveness, and resilience across Europe’s capital markets by providing: A competitive and level playing field: Ensuring all firms involved in financial services, including technology firms, adhere to the ‘same risk, same activity, same regulation’ principle Technology neutral legislation: Providing flexibility for firms to adopt new technologies in a risk based and proportionate manner Global consistency: Promoting regulatory harmonisation across the EU, and global cooperation and consistency to reduce the barriers for technology adoption

Banks need to embed sustainable governance principles across the whole organisation and adopt a consistent corporate strategy if they are to successfully transition to a sustainable finance model according to guidance issued today, 10th September, by the Association for Financial Markets in Europe (AFME) and global law firm Latham & Watkins. The industry roadmap “Transition to Sustainable Finance” looks at the challenges facing firms as they integrate ESG principles into their business models and addresses issues such as corporate purpose, board governance oversight, shareholder activism and greenwashing. The roadmap is the first to look at how firms are set to deliver on their sustainable finance targets and aims to provide boards and senior leadership with a go-to guide on issues to consider from a governance, compliance and legal perspective. The guidance comes as a new AFME survey highlights that sustainable finance is a priority board issue and banks have made considerable progress to adapt their business model to deliver on sustainable finance targets. Looking into how 13 of the biggest global banks are structured to adopt sustainable finance principles, the survey reveals: 85% of respondents incorporate sustainable finance into their overall business strategy 85% have set sustainability targets 77% have established Board level oversight on sustainable finance 63% have started integrating sustainable finance considerations across risk management and business development but more work lies ahead for other functions Richard Middleton, AFME’s Managing Director, Head of Policy Division, said: “Sustainable finance is a fast-moving area and the regulatory environment is evolving rapidly. As all areas of firms’ businesses are affected in the transition to sustainable finance, it is important that firms establish and develop their corporate strategy, governance, purpose and objectives. “Our White Paper is intended as a roadmap to help senior management and the board to embed sustainable finance in a holistic and systematic manner across the business.” Judson Berkey, Managing Director, Sustainability Strategy, UBS said: "The sustainability journey for a bank involves more than just creating new products. A transformation is needed to embed new thinking into all aspects of the firm including governance, risk management and compliance. This thought leadership paper highlights key considerations in that crucial effort." Nicola Higgs, partner at Latham & Watkins, added: “We are delighted to have worked with AFME and its members to create a practical framework for the financial services industry looking to navigate the transition to sustainable finance. Financial services firms are seen as key players in driving the sustainability agenda of global regulators, presenting both opportunities and risks for those firms. The Paper provides a framework to navigate those risks and remain competitive in an increasingly significant global market.” Note to editors: The roadmap “Transition to Sustainable Finance” sets out 15 key principles in the areas of governance, conduct and compliance that banks should consider, including: Objectives and governance: Ensuring that a central corporate purpose is set and that there is collective understanding, oversight and accountability in relation to sustainable finance-related risk amongst internal and external stakeholders. Risk management: Whether sustainable finance create new risks for an organisation, and if so, how to integrate them into current risk management. Compliance & Monitoring: How to measure, monitor and mitigate the key risks arising from the transition to sustainable finance, including the tools and metrics that may be necessary to achieve this. Impact measurement: How to assess the progress and effectiveness of existing strategies deployed against established sustainable finance goals and determining what adjustments, if any, are required and identifying opportunities for further development and innovation. – Ends – AFME Contacts Patricia Gondim Interim Head of Media Relations [email protected] +44 (0)20 3828 2747

Given regulators increasing focus on outsourcing, AFME in collaboration with Latham and Watkins, has today published a reference paper ‘Outsourcing: The Legal and Regulatory framework’. Aimed at compliance and legal teams, the paper seek to act as a useful tool in helping firms understand and meet their responsibilities in relation to outsourcing arrangements. In particular the paper focuses on: consolidating all relevant European legal and regulatory requirements for arrangements with group entities and third parties, provides details of relevant enforcement decisions, considers the relationship between branches and head offices in outsourcing arrangements, provides jurisdiction specific information on the requirements and approaches in France, Germany, Ireland, Italy, Luxembourg, Spain and the United Kingdom and highlights Brexit related considerations for member firms. Recognising the regulatory and legislative changes that are expected to occur in relation to firms’ outsourcing arrangements, we plan to update this reference paper on an ongoing basis.

AFME has today published the first ever set of ESG guidelines for the European high yield market. The guidelines are intended to provide guidance on sustainable finance considerations for issuers and investors when leading or otherwise participating in offerings of non-investment grade notes (known as “high yield bonds”). The guidelines make recommendations for considerations and practices to encourage transparency and consistency in disclosure, as well as recommendations for due diligence practices related to such transactions. They are intended to assist the market by providing a framework for assessing relevant ESG factors, including: Disclosure and Diligence considerations; Impact of ESG factors on an issuer’s strategy and business model; and Exposure of an issuer to ESG risks, both at issuer and stakeholder level including sponsors and shareholders.

AFME has today published the first ever set of ESG guidelines for the European high yield market. The guidelines are intended to provide guidance on sustainable finance considerations for issuers and investors when leading or otherwise participating in offerings of non-investment grade notes (known as “high yield bonds”). The guidelines make recommendations for considerations and practices to encourage transparency and consistency in disclosure, as well as recommendations for due diligence practices related to such transactions. They are intended to assist the market by providing a framework for assessing relevant ESG factors, including: Disclosure and Diligence considerations; Impact of ESG factors on an issuer’s strategy and business model; and Exposure of an issuer to ESG risks, both at issuer and stakeholder level including sponsors and shareholders.

AFME has published a new research note on the“Impact of COVID-19 on European Capital Markets: Market Update”. The purpose of this report is to provide an update on how European capital markets have performed during the COVID-19 outbreak. This report follows a first publication launched in mid-April which assessed the initial impact of COVID-19 on Europe’s capital markets. Key findings: Issuance levels of investment grade (IG) bonds have reached record weekly, monthly and quarterly volumes. Q2 2020 saw the highest ever quarterly value of IG bond issuance for Non-financial corporates in Europe totalling EUR 225bn in proceeds. The increase has been largely driven by Central Bank support. An ESG recovery. European social, sustainable, and green bond issuance reached EUR 55.2bn in Q2 2020, the highest quarterly issuance volume to date. The increase was predominantly driven by social bond issuance which reached a record issued amount during the quarter of EUR19.1 bn. European market liquidity has deteriorated over the last few months. In most asset classes, bid ask spreads remain above pre-COVID levels with equity and corporate bond market bid-ask spreads respectively remaining elevated at about 30% and 40% higher than pre-crisis levels as of late June. Government bond bid-ask spreads also continue above pre-COVID levels, particularly for Italian and French sovereign bonds. Price volatility in equity and in fixed income markets also remain elevated and above pre-COVID levels. Follow on equity offerings have continued to support the recovery as companies seek to recapitalise and improve their balance sheet capacity. European secondary equity offerings totalled EUR 28bn in 2Q 2020, the largest quarterly volume since Q1 2017. After two months of a virtually inactive IPO market, the European primary equity market reopened in May with EUR 3.6bn in proceeds from 24 deals. Issuance volumes continue subdued compared to pre-COVID levels. European listed SMEs have also benefited from access to equity capital, predominantly from secondary offerings on Junior exchanges which totalled EUR 2.7bn between March and June of 2020. This amount, however, continues to represent a minor portion of total SME funding compared to bank lending. Record volumes of bank lending. Euro area statistics have shown a marked increase in corporate net lending and in gross lending to SMEs, as underpinned by EUR 2.6trn in state loan guarantees issued by European governments. Further increases in bank balance sheets are also to be expected as corporates continue to draw down on their existing borrowing facilities and banks channel government support programmes to clients. The report follows from AFME’s research on the initial impact of COVID-19 on Europe’s capital markets and summarises AFME’s approach to COVID-19 and the areas the association has been focusing on to ensure that markets remain well-functioning and liquid in light of the recent impact of the coronavirus. – Ends –

A diverse and competitive market structure has ensured European equity markets remain robust, according to a study published today (7 July) by the Association for Financial Markets in Europe (AFME). The study analysed the liquidity landscape of European markets using data provided by independent analytics firm Big XYT and revealed that for the first six months of 2020, 81% of addressable liquidity was executed on-venue, 13% on systematic internalisers and 6% over the counter (OTC). Other key findings include: 81% of total addressable liquidity is found on-venue, with 13% being traded on systematic internalisers and 6% pure OTC. The share between lit and dark markets remained stable after the application of MIFID II, with the quality of price formation remaining strong. The current range of execution venues serve different functions and market needs. Continuous lit order book trading is not interchangeable with the service provided by systematic internalisers, which play a critical role for pension and investment funds. Pensioners and savers would be worse-off if diversity of trading was curtailed. Better data reporting is needed to benefit investors, including increased identification and flagging of the different trade categories. This analysis was produced using data provided by Big XYT, an independent analytics firm. For more details, read the report and our press release

AFME has set out its priorities for the future EU-UK relationship in financial services, calling the EU and UK to put in place equivalence determinations and address regulatory challenges as soon as possible to minimise disruption to markets and businesses. The paper also highlights outstanding regulatory challenges for financial services that should be addressed ahead of the end of the transition period.

AFME has release a discussion paper that highlights how industry collaboration can better strengthen and harmonise the EU’s supervisory framework in the AML/CFT space.

AFME has published a new research note on the “Initial impact of COVID-19 on Europe’s capital markets”. The report analyses the significant impact that Covid-19 has had across all major capital markets sectors including: equities (IPOs and secondary), fixed income primary and secondary (sovereigns, corporates, securitisation, high yield, leveraged finance), FX, derivatives, and banks. The report also highlights AFME’s initiatives to support markets during the COVID-19 crisis. Key findings: European capital markets have continued to operate well following the outbreak of COVID-19, with liquidity ranging from very good to mixed, depending on the sector. In fact, there have been record volumes of new issuance in certain sectors. Issuance of investment grade corporate bonds surpassed EUR 50bn in the first week of April; this amount was also the highest weekly amount ever issued in Europe. French companies have been particularly active in this respect. This is remarkable, given that many, if not most, financial market participants are working remotely. Markets are more volatile than a few months ago, which has made it costly for some companies to list through IPOs. IPO issuance on European exchanges has declined 83% compared to a year ago. Markets have been playing their role in providing liquidity, price formation, and timely clearing and settlement procedures, contributing to capital allocation and helping investors manage their portfolios. Equity average daily trading has surged 94% year on year in March-20, corporate bond trading increased 31% year on year in Q1 2020, and FX trading rose 61% year on year in March-20. The rapid increase in securities trading and post-trade activity has been carried out without any major disruption from a business continuity perspective. Securitisation secondary markets have suffered disproportionate reductions in liquidity due to central bank support which is more limited in scope and slower and more difficult to access than for other fixed income sectors. Banks operating in Europe are well-positioned from a solvency and liquidity perspective to support households and businesses during this period of abnormal economic pressure.