Video overview The introduction of the Market Abuse Regulation in 2016, saw financial institutions implement a series of systems and controls to mitigate the risk of insider dealing, market manipulation and unlawful disclosure of inside information. Since then firms have needed to continually adapt and evolve their controls in order to continue to meet regulators expectations. The impact of the Covid-19 pandemic resulted in firms having to ensure their approaches were agile and able to manage the emerging risks caused by market volatility and unprecedented numbers of colleagues working from home. AFME in collaboration with EY, have today published ‘Governance of Market Abuse Surveillance Controls – An industry perspective’. The report provides insight into firms current state of surveillance governance and considers what the future state could look like, whilst addressing the key questions firms are actively addressing as they develop their future strategic roadmap. Drawing on survey responses and deep dive interviews with AFME Members and European regulators. We hope that the insights in this paper will help to frame the key aspects of this debate and provide firms with industry insight to advance the effectiveness of their surveillance governance The report considers five key themes: Restructuring the operation model Navigating risks through the STOR process Establishing a well governed framework Chasing completeness and A change in approach: focusing on risk driven methodologies This report sits alongside a series of compliance papers we have produced in partnership with EY, including the The Future of the Compliance Control Environment and the Scope and Evolution of the Compliance Function

In 2018, AFME published a paper in collaboration with EY on the ‘Scope and Evolution of the Compliance Function’. It identified that the availability of more complex data would allow Compliance to adopt different ways of managing risks, for example, anticipating or predicting risk events more proactively. This would be likely to result in broader demands from Compliance’s stakeholders, both within and outside the firm. Alongside these, it was anticipated that there would be further structural changes across the 3 Lines of Defence, driven in part by operational efficiency and cost effectiveness, as well as heightened regulatory expectations. While this transformation has been taking place to varying degrees, the disruption to the capital markets industry caused by COVID-19 has resulted in immediate and fundamental changes to AFME’s Members, e.g. large-scale remote working and accelerated developments in the use of technology. The lessons learned during the 2020 pandemic period are likely to inform new ways of working, which will undoubtedly lead to a more fragmented workforce going forward and thus the need for greater supervision and surveillance techniques, including the use of a broader set of data points combined with enhanced analytical tools. This paper focuses on four key areas with respect to the compliance control function and offers some considerations for firms thinking about how to ensure that the control environment continues to be robust, and can evolve to address new and developing risks in these conditions: Enhancing data and analytical tools Surveillance, testing and monitoring Conduct, culture and well-being Remote working and location strategy”

The COVID-19 pandemic has accelerated the journey of investment banks’ technology transformation, but both consistent regulation and further investment are needed to ensure banks in Europe can deploy competitive technology. The Technology and Innovation in Europe’s Capital Markets report surveyed the largest investment banks in Europe to assess their technological progress over the past two years. Findings reveal that banks have accelerated adoption of emerging technologies and new ways of working. However, insufficient IT investment, complex legacy systems and increasing regulatory requirements, remain some of the key barriers for further progress. Among the key findings from the report: 50% of respondents believe that investment allocated to technology transformation is sufficient, up from 28% in 2018. 63% of investment banks are now implementing cloud computing, up from 33% in 2018. However, only 17% of respondents believe the benefits of new technologies are being realised across their organisation. 61% of investment banks see operational resilience as one of the top priorities for their technology transformation. 90% of respondents believe the COVID-19 pandemic will be a catalyst for future technology and operations change.

AFME has today published a new report tracking the recent progress of the Capital Markets Union (CMU) project through seven Key Performance Indicators (KPIs). It is a joint publication with ten trade associations and international organisations representing global and European capital markets stakeholders. This third edition of the “Capital Markets Union Key Performance Indicators” report tracks how individual member states have progressed on key metrics such as access to equity finance, levels of market integration, transition to sustainable finance and a supportive fintech environment. Key findings include: Unprecedented levels of capital markets funding supported businesses in the first half of 2020. Sustainable bond issuance has increased, with growth of social bonds consolidating Europe’s ESG leadership. However, an undersized equities market means SMEs continue to rely on bank loans, restricting their opportunities to grow. Securitisation volumes continued to fall, limiting banks' capacity to expand their lending. Capital markets union needed more than ever to support long-term recovery. Press releaseavailable inEnglish,French, German, Italian, Spanish. Individual country analysis available for France, Germany, Italy, Spain.

Our latest paper from AFME’s Technology & Operations Division sets out 5 key industry messages for the adoption of Agile work practices at scale in capital markets. The key messages for banks, regulators, third party providers and the industry as a whole aim to increase the transparency and collaboration required to build further confidence, trust and capability in Agile work practices at scale adoption. -ENDS- AFME Contacts Patricia Gondim Interim Head of Media Relations [email protected] +44 (0)20 3828 2747

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.