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Brexit: Key cliff edge risks in wholesale financial services
22 Jan 2018
Available in... French German Spanish AFME has published a short paper highlighting some of the potential cliff edge risks that Brexit could create for market efficiency and financial stability. The Brexit process is presenting businesses, investors and banks with unprecedented challenges. The time pressure on firms to prepare themselves and their clients for the UK’s exit from the EU is increasing. However, it remains unclear what kind of exit and future relationship arrangements will be agreed upon. AFME has highlighted the need for transitional arrangements which would keep existing market arrangements in place for a limited period of time following the UK leaving the EU. This is necessary to provide certainty and stability to business and market participants as they prepare for the future arrangements that have yet to be agreed between the EU27 and the UK. However, while some cliff edge risks would be mitigated (in whole or in part) by a longer transition period, risks remain that need to be addressed irrespective of a transition. In this paper, we have therefore focused on issues which we believe require intervention from policymakers and/or regulators in the UK and EU27 and are not easily resolved by banks’ own plans or industry solutions. We hope this paper will provide further helpful clarity for the forthcoming discussions on the future relationship between the European Union and the UK. We would value your feedback on the report, so please let us know if you have any comments or questions.
The links between the Risk Reduction package and the development of Europe’s capital markets
4 Dec 2017
Case studies on the significance of the ongoing EU banking reforms for the end-users of capital markets and the real economy AFME has published a new report highlighting the significant impact that key elements of the European Commission’s Risk Reduction Measures (RRM) legislative package could have on Europe’s capital markets and the wider economy. The report sets out eight case studies which explore the potential impact of the RRM on capital markets products and transactions used by different real economy actors such as corporates, institutional investors and EU governments. It is being released at an important moment for Europe’s financial markets where, a decade after the financial crisis, significant progress has been made towards building a stable and resilient financial system. The Risk Reduction Package marks an important step towards completing such efforts, which comes at the same time as the EU is implementing an ambitious programme to develop Europe’s capital markets and establish a Capital Markets Union. The report explains why the legislative proposals presented by the European Commission should not be considered in isolation, but rather in light of the very significant links they have with capital markets and the broader economy. It includes constructive proposals for how to achieve appropriate and effective prudential rules while also enabling capital markets to support Europe’s growth objectives.
Annual Review 2017
15 Sep 2017
2017 has been a year of structural and political change, leaving the European capital markets industry with more questions than answers. At such a time of uncertainty, our role as a pan-European trade group could not be more important, not just to present the voice of the wholesale financial markets in Europe, but to provide a meaningful, fact-based contribution to help shape the future of our industry. AFME is committed to fostering deep and integrated European capital markets which serve the needs of companies, investors and savers across Europe. In the context of theevolving relationship between the EU and UK we believe this mission is best achievedby providing a bridge between EU27 and UK policymaking. As we look towardsthe next twelve months, AFME will continue to perform this role, representing theindustry and bringing to bear deep policy and technical expertise. We are now present on-the-ground in London, Brussels and Frankfurt, and AFME staff continue to make the industry voice heard through regular meetings with local policymakers, regulators and market participants across the EU27. As we enter the next phase of Brexit, it is critical that policymakers are well-informed of our industry’s concerns and the potential impact their decisions could have on the financial services sector. AFME’s fact-based contribution remains central to the debate. We continue to hold engagement meetings with officials and policy makers across Europe, calling for a smooth transition to ensure European capital markets are able to continue to function well. To support our asks, AFME has produced a portfolio of factbasedreports which contribute meaningful data on the potential impact of Brexit onthe wholesale banking industry, end-users and supervisors, most recently Bridging toBrexit: Insights from European SMEs, Corporates and Investors. This year marked an important milestone as the European Commission published its mid-term review of the Capital Markets Union (CMU) initiative. AFME has been a strongadvocate of the CMU initiative, which is more important than ever to boost growthand investment and channel capital to the real economy. Going forward, the focus onstrengthening supervisory powers, fintech and sustainable finance, among others, areall important CMU priorities which will ensure the project remains fit for purpose. One of AFME’s ongoing priorities continues to be raising awareness of the role capitalmarkets play in promoting growth. This year we produced two reports outlining howCMU can help address two key issues: the shortage of risk capital for high growthcompanies and the need to increase private investment in infrastructure. Addressingboth of these will help ensure that Europe continues to see steady growth. It is undoubtedly a challenging time for our industry in Europe, and AFME is dedicatedto promoting the ‘E’ in AFME more so than ever. I would like to conclude by expressing my sincere appreciation to my fellow AFME Board members and staff. I am so grateful for all they do for the industry. Michael Cole-Fontayn Chairman Association for Financial Markets in Europe September 2017
Impact of Brexit on cross-border financial services contracts
8 Sep 2017
The market place for the cross-border provision of financial services between the UK and the EU is large and active and reflects over three decades of integration and the implementation of the single rulebook. The UK exit from the EU will change this. A new long-term partnership agreement will need to be negotiated and agreed, and transitional measures defined to help mitigate the impact of a revised market framework for businesses that buy and sell between the EU and the UK. The regulatory framework and financial passport that has enabled EU-based customers to access the diverse suite of cross-border financial products and services from UK-based banks1 will cease to apply after the UK’s exit from the EU. The same holds true for UK-based customers accessing financial products and services from EU-based banks. What, if anything, will replace these current rights to contract for such financial products and services between the EU and the UK remains unclear. This has important implications for the many customers that hold contracts for the provision of financial services between the two markets where the duration extends beyond the date in 2019 when the UK is expected to exit the EU. It is estimated that €1.3 trillion of UK-based bank assets are related to the cross-border provision of financial products and services to a variety of customers ranging from governments and individuals to businesses of all sizes. These services include lending and capital markets, risk management and foreign currency products and services spanning the entirety of the financial services sector, including banking, insurance and investment management. A significant proportion of this back-book of contracts extend beyond the 2019 exit date, providing important funding and risk management for businesses. Many of these services support EU exporting businesses that are key drivers of the EU and UK’s international earnings and strong contributors to economic growth and job creation. European and UK businesses are increasingly concerned about the potential impact on their existing contracts. The UK exit from the EU potentially creates significant uncertainty for these businesses, including with respect to the continuity of the contracts which support their funding, economic activity and risk management. Early action is required to provide the necessary clarity that these contracts will continue following the exit of the UK from the EU.
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