AFME is pleased to present its views and recommendations on key priority areas in the sixth Capital Requirements Directive and the third Capital Requirements Regulation (CRD6/CRR3). The legislative proposal is expected to be published by the European Commission in mid-2021 and will come at an important juncture when policymakers are dealing with the fallout from the Covid-19 crisis and the need to ensure a strong and sustained economic recovery. This makes it even more important that the impact of CRR3 is correctly assessed and carefully calibrated, so that it is designed and implemented in a way that does not, unintentionally, constrain banks’ ability to support the economy. At the same time CRR3 needs to be considered in the context of EU’s urgent priorities to complete the Banking Union, reduce fragmentation of financial markets and develop and deepen Europe’s capital markets through the establishment of a genuine Capital Markets Union. In this publication, drafted in cooperation with ISDA, we present our recommendations for a CRR3 that is faithful to the overarching objectives contained in Basel III but which at the same time reflects the priorities outlined above.

This response proposes key changes to the UK Listing Regime that we believe will promote a competitive market while retaining high standards of governance, transparency and shareholder protection. Michael Cole-Fontayn, AFME Chairman, said: “The UK Listing Regime Review is proposing to offer a fresh, compelling power of choice to prospective issuers and their advisors from around the world. Its proposals will provide more clarity and flexibility to the markets while still maintaining high standards of governance and transparency. We believe these changes will be crucial in encouraging business to access equity markets in order to raise capital and fund growth.“

AFME has published today a position paper highlighting the risk of mandatory buy-ins to Europe’s economic recovery from the Covid-19 crisis, and calling for this measure to be removed from the upcoming Central Securities Depositories Regulation (CSDR). According to the paper, the mandatory buy-in rules will negatively impact the market by: Increasing costs for issuers and investors Reducing investor appetite, in particular for SME securities Removing liquidity from European markets AFME believes this is a disproportionate measure to address the small percentage of trades that fail. The trade association is calling for a more pragmatic, discretionary approach to the buy-in regime.

This paper highlights priorities for the future EU-UK relationship in financial services following the conclusion of the EU-UK Trade and Cooperation Agreement (TCA) and the end of the transition period.

A report by the Association for Financial Markets in Europe (AFME) and PwC reveals that an equity shortfall of up to €600bn threatens Europe’s economic recovery despite the significant public support measures and private capital made available across Europe to support economies during the pandemic. AFME calls on the European Commission and members states to introduce measures to bolster Europe’s equity and hybrid markets and expand funding avenues for businesses, further enabling Europe’s economic recovery In a report published today (19th) in partnership with PwC, AFME warns that Europe needs to bridge a gap of€450-600bn[1]in equity needed to prevent widespread business defaults and job losses as COVID-19 state support measures are gradually reduced. The reportRecapitalising EU businesses post COVID-19reveals that despite the support provided by governments and the private sector since the start of the pandemic, 10% of European companies have cash reserves to only last six months. The pan-European trade association is calling on authorities to explore and develop further short-term measures to support Europe’s equity and hybrid markets and accelerate the Capital Markets Union to help fund the recovery. Unless urgent action is taken, a spike in insolvencies could start as early as this month and threaten the EU’s recovery prospects, AFME warns. The report presents insights from interviews with businesses and private sector investors from across the continent to propose solutions to Europe’s emerging funding gap. The findings reveal that many mid-size and SME corporates do not wish to give up control of their business but are willing to pay a premium not to dilute their voting rights, as well as are willing to distribute a share of profits to investors. Hybrid instruments are ideally suited to address these needs. In order to bolster capital markets to support businesses in the recovery phase, AFME is outlining the following recommendations: Proposing a new EU-wide hybrid instrument designed specifically for the corporate sector. This could be in the form of a new preferred shared instrument, which is state-aid compliant, to build scale and liquidity, and which ideally could be developed to comply with social investment objectives to attract maximum investor interest. Scaling up existing EU-wide recovery support schemes such as the EIF European Guarantee Fund tailored to the needs of SMEs, particularly the smallest companies. Replicating existing member state best practices on hybrid instruments, as well as raising awareness of the range of capital markets instruments available to mid-caps and SMEs who may be unaware such options exist Exploring further use of innovative instruments, such as dual class shares to address the control concerns of companies as well as debt for equity swaps to reduce leverage. Recalibrating state aid rules for a systemic crisis. Accelerating equity investment measures under the Capital Markets Union project.

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.