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 50bnin 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,andFX trading rose 61% year on yearin 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 liquiditydue 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 liquidityperspective to support households and businesses during this period of abnormal economic pressure.

This report collates timely information on EU GSIBs’ prudential capital, leverage and liquidity ratios with updated statisticsas at 31 December 2019. It also illustrates the recent performance of the debt and contingent convertibles(CoCo) markets and the funding structure for banks in Europe as of end of March 2020. Among the main findings of this report: EU systemically important banks* (EU GSIBs) reported in 4Q19 the highest quarterly solvency ratios in records (since our records began in 2013). Amidst the current COVID-19 global pandemic, European banks are significantly well positioned from a solvency and liquidity perspective to continue to support the economy and facilitate risk management. European banks have consistently built up their capital and liquidity buffers over the last years through a combination of internal restructuring, profit generation and external capital raising. EU GSIBs end-point CET1 ratio increased to 13.6% in 4Q19, from 13.1% in 4Q18. End-point Tier 1 ratios increased to 15.3% in 4Q19, from 14.8% in 4Q18. End-point Leverage ratios (LR) increased to 4.9% in 4Q19 from 4.8% in 4Q18. Liquidity Coverage Ratio (LCR) declined to 140.4% on a weighted average basis in 4Q19, from 141.3% in 4Q18. TLAC ratio stood at 26.1% relative to RWAs and 8.4% as a percentage of leverage exposure. The amount of new capital raised during 2019 by EU banks totalled €28.1 bn, €4bn above the amount raised in 2018. The amount of fresh capital raised was almost exclusively in the form of contingent convertible (CoCo) bonds. CoCo risk premia (option-adjusted spreads) has increased by 365bps in 2020YtD, from record lows observed during the first two months of the year. Markets are likely pricing the potential repercussions COVID-19 on banks’ future earnings. The increase in CoCo spreads was mirrored by a sudden stop in CoCo issuance by European banks. BOX: Pages 22-29 provide an overview of the most recent COVID-19 regulatory decisions in Markets and Prudential dossiers and AFME responses where relevant. COVID-19 has had significant implications for AFME members globally with many having to focus resources on managing business continuity issues. AFME is working with official sector authorities to ensure that its members can continue to support their clients during these challenging times.

The Report contains European leveraged finance market trends for the fourth quarter of 2019, which includes issuance and credit performance figures for the high yield and leveraged loan markets. Key highlights: European leveraged finance issuance (leveraged loans and high yield bonds) increased to €80.3 billion in 4Q’19, a 4.9% increase from €76.5 billion in 3Q’19 and an over twofold increase from €35.2 billion in 4Q’18. Primary high yield issuance totaled €33.9 billion on 67 deals in 4Q’19, a 8.4% increase in volume from €31.3 billion on 58 deals in 3Q’19 and an almost fourfold increase from €6.9 billion on 22 deals in 4Q’18. The proportion of USD-denominated issuance decreased to 26.0% of all issuance in 4Q’19, down from 31.1% in 3Q’19 but up from only 8.8% in 4Q’18. The leading use of proceeds for high yield bonds issuance in 4Q’19 were general corporate purposes with €17.7 billion. Leveraged loan issuance, including first lien, second lien, and mezzanine financing, totaled €46.4 billion on 67 deals in the fourth quarter of 2019, up 2.5% in volume from €45.2 billion on 69 deals in 3Q’19 and a 64.1% increase from €28.2 billion on 66 deals in 4Q’18. Over two-thirds (67.9%) of deals financed in the fourth quarter of 2019 were issued for refinancing and/or repayment of debt, up from 47.9% in 3Q’19 and up from 66.7% in 4Q’18. Pricing spreads for institutional loans tightened by 12 basis points (bps) q-o-q but widened by 10 bps y-o-y. Spreads for pro rata loans widened by 47 bps q-o-q and by 38 bps y-o-y. Credit quality: S&P reported the trailing 12-month speculative-grade default rate at 2.2% as of December 2019, an increase from 2.1% in September 2019 and from 2.0% in December 2018. Moody’s reported the trailing 12-month speculative-grade default rate at 1.5% in December 2019, up slightly from 1.4% in September 2019 but down from 2.0% in December 2018. Six bond-related defaults were reported in the fourth quarter of 2019 by Standard and Poor’s and Moody’s, all in developed market Europe. The most common reason for default in 4Q’19 was distressed exchange. According to S&P, downgrades exceeded upgrades in developed market Europe (36 downgrades to 19 upgrades), a slightly better ratio than 36 downgrades to 14 upgrades in 3Q’19 but worse than 39 downgrades to 27 upgrades in 4Q’18. Likewise, according to Moody’s, in 4Q’19 downgrades exceeded upgrades in Europe (34 downgrades and 6 upgrades), a slightly better ratio than 34 downgrades and 1 upgrade in 3Q’19 but significantly worse than 31 downgrades and 16 upgrades in 4Q’18.

This report provides a comprehensive data source with updated statistics on the Government bond primary and secondary markets in Europe (EU27 and the United Kingdom). Report highlights include: The highest average annual traded volume since 2015 was observed during the year of 2019, according to MarketAxess The average bid-cover ratio (demand/amount allocated) was 2.13 in 4Q19, a slight decrease of -0.49% (YoY) from 4Q18 and a -0.73% decrease QoQ from 3Q19. During 4Q19 there were 4 long-term credit rating upgrades for EU countries (following 3 in 3Q19, 2 in 2Q19 and 5 in 1Q19) and no downgrades, bringing the year to date total to 14 upgrades and no downgrades. There have been 4 further upgrades in 2020 to date. Outstanding amount of EU green sovereign bonds surpasses EUR 40bn, after the Irish green bond was re-opened for an additional EUR 2bn of volume in a tap issuance. There has been continuous improvement in EU credit quality. Particularly of Central and Eastern European countries, where Latvia and Lithuania have been assigned the highest credit rating in both countries’ history. There has been a recent repricing of sovereign bond markets due to the Covid-19 pandemic. Eurozone 1Y market-implied inflation expectations fall to 5-year low, Eurozone (AAA) 10Y spot yield fall to lowest value on record and Italian 5Y credit default swaps reach 5-month high.

AFME is pleased to circulate its Q4 2019 Securitisation Data Report Main findings: In Q4 2019, EUR 87.4 billion of securitised product was issued in Europe, an increase of 116.0% from Q3 2019 and a decrease of 1.4% from Q4 2018. Of the EUR 87.4 billion issued, EUR 43.9 billion was placed, representing 50.2% of issuance, compared to the 76.9% of issuance in Q3 2019 and the 39.8% of issuance in Q4 2018. Outstanding volumes fell slightly to EUR 1.16 trillion outstanding at the end of Q4 2019, a decrease of 2.7% QoQ and 6.5% YoY. Credit Quality: In Europe, upgrades outpaced downgrades in Q4 2019, with upgrades concentrated in RMBS, both conforming and non-conforming.

AFME is pleased to circulate its Q3 2019 Securitisation Data Report Main findings: In Q3 2019, EUR 40.4 billion of securitised product was issued in Europe, a decrease of 33.4% from Q2 2019 and a decrease of 25.8% from Q3 2018. Of the EUR 40.4 billion issued, EUR 31.1 billion was placed, representing 76.9% of issuance, compared to the 45.6% of issuance in Q2 2019 and the 55.8% of issuance in Q3 2018. Outstanding volumes fell slightly to EUR 1.19 trillion outstanding at the end of Q3 2019, a decrease of 4.4% QoQ and 0.5% YoY. Credit Quality: In Europe, upgrades outpaced downgrades in Q3 2019, with upgrades concentrated in RMBS, both conforming and non-conforming. Regulatory update: The implementation of the Level 2 legislation under the STS Framework is still progressing. However, some of the key elements of the Securitisation Framework are still pending the finalisation, such as the RTS on Risk Retention (expected adoption by the EC later in 2020). In response to the increasing regulatory and policy focus on Sustainable Finance (including the environmental aspects) in September 2019 AFME published a position paper on Green Securitisation in which we highlighted the key voluntary principles which policymakers and market participants should support to help propose green securitisation.

AFME is pleased to circulate its Equity Primary Markets and Trading Report for the fourth quarter of 2019 (4Q 2019) and 2019 full year. The report provides an update on the performance of the equity market in Europe in areas such as primary issuance, Mergers and Acquisitions (M&A), trading, and equity valuations Key highlights: a challenging 2019 for equity activity Equity underwriting on European exchanges accumulated a total of €116.1 bn in proceeds in 2019, a 6% decrease from the value originated in 2018 (€124 bn). 152 IPOs were issued on European exchanges during 2019—the lowest annual number since 2012 (144). IPO proceeds in 2019 decreased 38% compared to the amount raised in 2018. IPOs on Junior markets totalled €1.8 bn in proceeds in 2019, the lowest annual amount since 2015. Completed Mergers and Acquisitions (M&A) of European companies totalled €903.2 bn in 2019, a decrease of 16% from 2018 (€1,072.2 bn). The Iberia region saw the lowest M&A deal value amount since 2003 while M&A of Nordic European countries reversed a 4-year upward trend with a 20% annual decline in deal value. Private Equity-backed M&A activity (“Sponsor” deals) totalled €256 bn in 2019— a decline of 14% and also the lowest annual amount since 2016. Equity trading activity on European main markets and MTFs generated a total of €9.3 tn in turnover value in 2019, a decrease of 16% from 2018 (€11.0 tn). Update on MiFID II dark trading caps: The European Double Volume Cap (DVC) mechanism seeks to limit the amount of dark trading of equity-like instruments on EU venues. ESMA publishes on a monthly basis the list of instruments temporarily banned from dark trading at the EU or trading venue level after their trading volumes surpass pre-determined dark trading thresholds. The number of instruments banned from dark trading has increased over the last six months from 267 in August 2019 to 421 in January 2020 (c1% of the Universe of 28,880 equity and equity-like instruments). 2019FY variation of European Equity activity EU27 member countries, UK and Switzerland

AFME is pleased to circulate itsQ3 2019 Government Bond Data Report. This report provides a comprehensive data source with updated statistics on the Government bond primary and secondary markets in Europe (EU28). Report highlights include: The highest third quarter traded volume since 2014 was observed during 3Q19, according to Trax data The average bid-cover ratio(demand/amount allocated) was 2.14 in 3Q19, a slight increase of 0.81% (YoY) from 3Q18 and a -8.06% decrease QoQ from the multi-year high recorded in 2Q19. During 3Q19 there were3 long-term credit rating upgrades for EU countries(following 2 in 2Q19 and 5 in 1Q19) and no downgrades, bringing the year to date total to 14 upgrades and no downgrades (there were 4 further upgrades in 4Q19 to date). Following 5 Primary Dealers leaving the market in 2019 to date, theaverage number of EU Primary Dealers is equal to the lowest number on record, we look at country specific trends in more detail. EU weighted average coupon rates of outstanding sovereign debt falls by 61bp since early 2016. The 13bp fall in EU weighted average coupon rates in the first three quarters of 2019 is already greater than the annual drop of 8bp observed during 2018. Outstanding amount of EU green government bonds reaches EUR 39 bn. Q3 2019 marks the first time green market activity took place in a third quarter of the year.

This report collates timely information on EU GSIBs’ prudential capital, leverage and liquidity ratios with updated information as at 30 September 2019. It also illustrates the recent performance of the debt and contingent convertibles (CoCo) markets and the funding structure for banks in Europe as of late November 2019. Among the main findings of this report: EU GSIBs end-point CET1 ratio increased to 13.3% in 3Q19, from 13.1% in 4Q18. During the latest quarter, earnings retention contributed 18bps to the CET1 ratio variation. TLAC ratio stood at 25.6% relative to RWAs and 8.2% as a percentage of leverage exposure TLAC ratios (a new addition to the report) stood comfortably above the minimum required by the FSB global standards (16% of RWAs and 6% of leverage exposure measure). As of 3Q2019, EU GSIBs have accumulated a total of c€1.2tn of TLAC including own funds and eligible liabilities. End-point Tier 1 ratios increased to 15.0% in 3Q19, from 14.8% in 4Q18. End-point Leverage ratios (LR) declined to 4.7% in 3Q19 from 4.8% in 4Q18. Liquidity Coverage Ratio (LCR) declined to 138.4% on a weighted average basis in 3Q19, from 142.4% in 4Q18. The amount of new capital raised during 2019YtD by EU banks totalled €26.2 bn, €3.8bn above the amount raised in 2018FY. The amount of fresh capital raised was almost exclusively in the form of contingent convertible (CoCo) bonds. Coupon rates of newly originated CoCos have decreased on a weighted average basis to 5% in 4Q19 (from 7.1% in 4Q18) on the back of lower risk-free long-term yields and higher credit ratings of the recently issued instruments. New GSIB list:The Financial Stability Board (FSB) updated on Nov-19 the list of globally systemically important banks (GSIBs). One EU bank moved from bucket 3 (2% CET1 capital surcharge) to bucket 2 (1.5% surcharge). Since 2012, the number of EUGSIBs has declined from 14 to 11 in 2019. These changes have also signified, on a weighted average basis, lower GSIB capital surcharges for global EU banks. BOX: Capital Markets Union: Key Performance Indicators: Pages 22-33 summarise the main findings of a recent AFME report on Capital Markets Union (CMU) Key Performance Indicators (KPIs), produced in collaboration with ten other trade associations and international organisations. The report assesses the EU’s progress against 8 KPIs across the 8 political priorities of the CMU, including a country-by-country comparison of individual EU Member State progress against the CMU’s objectives. Compared to last year’s report, the findings show mixed results, with some indicators showing a positive trajectory while others have deteriorated or remained neutral. o Europe is a global leader in sustainable finance, representing 43% of global issuance of sustainable bonds in 2018 (vs. 16% in the United States and 18% in China), with the Euro as the most popular denomination of choice. o Europe’s reliance on bank lending has increased in recent years. EU 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 – (14% on average in 2013-2017). o The EU lags behind other jurisdictions on FinTech funding – EU27 FinTech companies have only benefited from €6.3bn in investments since 2009, compared with €105bn in the US and €20.8bn in China.

The Report contains European leveraged finance market trends for the third quarter of 2019, which includes issuance and credit performance figures for the high yield and leveraged loan markets. European leveraged finance issuance (leveraged loans and high yield bonds) increased to €66.4 billion in 3Q’19, a 1.7% increase from €65.3 billion in 2Q’19 and a 19.5% increase from €55.5 billion in 3Q’18. Primary high yield issuance totaled €30.3 billion on 53 deals in 3Q’19, a 3.8% increase from €29.2 billion on 71 deals in 2Q’19 and a 71.2% increase from €17.7 billion on 46 deals in 3Q’18 The proportion of USD-denominated issuance increased slightly to 30.9% of all issuance in 3Q’19, up from 28.6% in 2Q’19 and up from 20.3% in 3Q’18. The leading use of proceeds for high yield bonds issuance in 3Q’19 were general corporate purposes with €11.6 billion. Leveraged loan issuance, including first lien, second lien, and mezzanine financing, totaled €36.0 billion on 52 deals in the 3Q’19, unchanged in volume from €36.0 billion on 69 deals in 2Q’19, but a 4.7% decrease from €37.8 billion on 66 deals in 3Q’18 Nearly half (43.9%) of deals financed in the third quarter of 2019 were issued for refinancing and/or repayment of debt, down from 71.2% in 2Q’19 but up from 23.5% in 3Q’18 Pricing spreads for institutional loans tightened by 11 basis points (bps) q-o-q but widened by 50 bps y-o-y. Spreads for pro rata loans tightened by 28 bps q-o-q and by 18 bps y-o-y. Credit quality: S&P reported the trailing 12-month speculative-grade default rate at 2.1% as of September 19, a decrease from 2.3% in June 2019 and unchanged from 2.1% in September 2018. Moody’s reported the trailing 12-month speculative-grade default rate at 1.2% in September 2019, up slightly from 1.1% in June 2019 but down from 2.4% in September 2018 Three bond-related defaults were reported in the third quarter of 2019, all in developed market Europe. Two firms defaulted due to filing banktrupcy and one due to missed interest payment. According to S&P, in 3Q’19 downgrades exceeded upgrades in developed market Europe (36 downgrades and 14 upgrades), a much worse ratio than 25 downgrades and 27 upgrades in 2Q’19 and worse than 17 downgrades and 19 upgrades in 3Q’18