The report presents the latest data on prudential capital, leverage, and liquidity ratios for European GSIBs, and illustrates the performance of debt and contingent convertible (CoCo) securities issued by European banks. Among the main findings of this report: The end-point CET1 ratio of European GSIBs increased to 14.2% in Q1 2024 from 14.1% in Q4 2023: The increase was primarily driven by strong organic capital generation partially offset by distributions to shareholders. Higher RWAs also contributed negatively to the variation. TLAC capital covered 31.8% of RWAs and 9.6% of the exposure measure in Q1 2024, marginally below 32.1% and 9.7% in the previous quarter. 2 out of the 29 monitored European countries increased their national countercyclical buffers in Q1 2024, while 6 countries will see further increases during the second quarter of the year. AT1 bond issuance recovery slows down: Following the March 2023 AT1 market turbulence episode, issuance started to recover in June 2023 and gradually increased during the rest of 2023. However, AT1 instruments only raised €4.6bn in proceeds in Q1 2024, marking a decrease of 51% YoY and 28% QoQ. This amount falls below pre-March 2023 issuance. AT1 risk premia returned to pre-turbulence levels. As of April 2024, the AT1 risk premium stands at 372bps, 24bps below the minimum levels observed in February 2023. GFMA responds to the GSIB revised assessment framework consultation on “window dressing” by the BCBS: In March 2024, the BCBS issued a consultation document proposing to modify the reporting instructions of stock variables used in the calculation of GSIB indicators. Under the proposed standards, stock variables will be reported at the average of values over the year rather than at end-of-year values. In its consultation response, AFME via GFMA questions that the evidence brought forward by the BCBS is not robust enough to justify a change in reporting requirements. If a change is to occur, a more suitable approach would be adopting a quarterly reporting framework to limit the burden placed on banks and ensure data accuracy. GFMA’s consultation is available here.

AFME is pleased to circulate its Q1 2024 Securitisation Data Report. Main findings: In Q1 2024, EUR 60.7 bn of securitised product was issued in Europe, an increase of 43.8% from Q4 2023 and an increase of 69.2% from Q1 2023. Of the EUR 60.7 bn issued, EUR 33.3 bn was placed, representing 54.9% of the total, compared to 67.3% of issuance in Q4 2023 and 55.4% of issuance in Q1 2023. Outstanding volumes (including CLOs) increased to EUR 1162.4 bn at the end of Q1 2024, a decrease of 1.5% QoQ and an increase of 2.4% YoY. Credit Quality:In Europe, upgrades comprised 87% of total rating actions by the main CRAs during Q1 2024, down from 90% of total rating actions during Q4 2023. STS issuance: In Q1 2024, EUR 14.4 bn of securitised product was notified as STS to ESMA and the FCA, representing 23.7% of the total issued volume in Q1 2024 (EUR 60.7 bn). Out of the EUR 14.4 bn in STS issuance, EUR 11.7 bn was placed, representing 35.1% of total placed issuance in Q1 2024 (EUR 33.3 bn).

The Report contains European leveraged finance market trends for Q1 2024. In particular, it includes issuance, valuations, and credit performance figures for the European high yield and leveraged loan markets. Key highlights: European leveraged finance issuance (leveraged loans and high yield bonds) accumulated €128bn in proceeds in Q1 2024, a 115% increase compared to €59.4bn issued in Q1 2023. The increase is attributable to a rise in both high yield issuance and leveraged loan origination. High yield bond issuance accumulated €40.4bn in proceeds during Q1 2024, an increase of 206% YoY and 157% QoQ. High yield bond proceeds were primarily used to repay or refinance debt (€29.9bn or 54.4% of the total), followed by general corporate purposes (€14.8bn or 36.6% of the total). The financial, customer discretionary, and communications sectors accounted for 62.1% of the issued amount. Leveraged loans generated €87.7bn in proceeds during Q1 2024, up from €46.1bn during the same period last year (+90%) and €54.1bn in the past quarter (+62%). The healthcare, professional services, and insurance sectors led origination, representing 37% of the quarter’s proceeds. Institutional spreads (3-month rolling average) gradually tightened over the quarter while remaining consistently above pro-rata spreads and ending the quarter at 408bps. Pro-rata spreads shortly rose to align with institutional spreads in February 2024, but dropped to 290bps by the end of the quarter. Credit Quality: S&P reported the trailing 12-month speculative-grade bond default rate at 4.11% in March 2024, an increase from 3.47% in December 2023. Moody’s reported the speculative-grade bond default rate at 3.60% in March 2024, relatively unchanged from the 3.54% recorded in December 2023 but up from the 2.59% of March 2023. 11 bond defaults were reported by Moody's and Standard and Poor's during the last quarter of the year. Fitch reported a trailing 12-month European leveraged loan default rate of 3.8% in March 2024, down from 4.39% in December 2023. According to Reorg, 100% of the European leveraged loan deals examined in the first quarter of 2024 were covenant-lite.

Equity underwriting on European exchanges rose 4% YoY in Q1 2024 on the back of a moderate 1% YoY increase in secondary equity offerings and a large annual increase in IPOs. Initial Public Offerings (IPOs) saw a large percentage increase of 387% YoY which, however, represented a small amount of only €5bn raised in Q1 2024, significantly below the quarterly average of €8bn observed since 2010. Not included in the Q1 2024 European total is Finland-headquartered company Amer Sports Inc, which launched its IPO on the NYSE raising $1.6bn at the end of January (the second-largest IPO by a European company during the quarter). IPO activity also increased on US exchanges but continues below historic quarterly averages. Chinese IPOs sharply declined raising €2.5bn in Q1 2024 (€10.4bn in Q1 2023). As of Q1 2024, a total of 6,981 domestic companies were listed on European exchanges, a decline from 7,113 in March of 2023 and 7,216 in March 2022 Mergers and Acquisitions (M&A) declined when measured as completed value (-12% YoY) but rose when measured as announced value (55% YoY), which may anticipate a robust outlook for European M&A. Average daily equity trading on European main markets and MTFs declined 6% YoY but increased 14% QoQ. Data trends show a deterioration in market liquidity as measured by turnover ratio (turnover value/market cap), with a decline from c150% in 2018 to 100-110% in the last 12 months. Double-volume cap update: According to ESMA, the number of instruments suspended under the DVC has marginally declined over the last 12 months, with 232 suspended instruments (191 at EU Level and 41 at TV level) as of March 2024. The number of instruments suspended at the TV was the lowest since August 2021

AFME is pleased to circulate its European ESG Finance quarterly data report for the first quarter of 2024. The aim of this report is to provide detailed data and analysis on the rapidly growing Sustainable Finance market in Europe. This report presents the latest data on ESG bond and Loan issuance, ESG bonds outstanding, carbon market prices and futures, and global and European funds with an ESG mandate. The report also illustrates the evolution of the green premium in Europe and gives an overview of the near-term direction of regulation in the sector. Among the main findings of this report: Modest annual growth in ESG bond and loan issuance: ESG bond and loan issuance increased by 2% compared to Q1 2023. The increase was primarily driven by sustainability-linked loan origination (+13% YoY). Sustainability-linked bonds exhibited a large decrease, falling by 34% YoY to €7.8bn. German issuers led in Q1 2024 by total ESG bond and loan issuance, closely followed by French issuers. Notably, c. 50% of sustainability-linked loans was originated in Germany and a quarter of ESG bonds was issued in France. Declining pool of ESG AUMs notwithstanding net quarterly inflows: Lower asset prices led to a 1.9% decrease in global ESG funds, reaching a total amount of $USD 9.5tn despite quarterly net inflows for $USD 18.3 bn. ESG AUMs invested in alternative and real estate assets dropped 36.6% and 37.4% QoQ respectively. The ESG premium continued to fluctuate at c1.4bps during the quarter: The ESG premium remained relatively stable throughout Q1 2024, moving within a range of 1.2 and 1.6 bps.

AFME is pleased to circulate the European Securitisation Data Snapshot for Q1 2024. Key highlights: Q1 2024 European Issuance In Q1 2024, EUR 60.7 bn of securitised product was issued in Europe,¹ an increase of 43.8% from Q4 2023 (EUR 42.2bn) and an increase of 69.2% from Q1 2023 (EUR 35.9bn).² Of this, EUR 33.3 bn was placed, representing 54.9% of the total, compared to EUR 28.4bn placed in Q4 2023 (representing 67.3% of EUR 42.2bn) and EUR 19.9bn placed in Q1 2023 (representing 55.4% of EUR 35.9bn). In Q1 2024 Pan European CLOs led placed totals, followed by UK RMBS and German Auto ABS.³ Pan European CLOs increased from EUR 7.9bn in Q4 2023 to EUR 11.6bn in Q1 2024. UK RMBS increased from EUR 5.4bn in Q4 2023 to EUR 9.2bn in Q1 2024. German Auto ABS increased from EUR 2.7bn in Q4 2023 to EUR 3.1bn in Q1 2024.

The report presents the latest data on prudential capital, leverage, and liquidity ratios for European GSIBs, and illustrates the performance of debt and contingent convertible (CoCo) securities issued by European banks. Among the main findings of this report: The end-point CET1 ratio of European GSIBs finalised 2023 at 14.2%, 27bps above 2022 levels. The increase was driven by robust earnings retention which contributed 96bps to the capital buildup. This was partially offset by buyback programmes undertaken by the large majority of European GSIBs. The Liquidity Coverage Ratio of European GSIBs finalised 2022 with a 47% buffer above the minimum requirement (100%) and above the ratio observed at the end of 2022 (145%). The 2023 European AT1 issuance amount was the lowest in the last decade. The market virtually stopped during April and May of 2023, leading to only €1.2 bn issued in June 2023 when the market reopened. The sudden stop was the consequence of the unexpected writedown of AT1 securities of a major Swiss bank in March 2023. AT1 issuance began to recover from the third quarter of 2023 and is currently on track to return to pre-writedown issuance levels. Following the high volatility period started in March 2023, AT1 option-adjusted spreads gradually tightened for the remaining of the year. However, the risk premium remains 24bps above the minimum levels observed in February 2023 prior to the turbulence episode. Status update on the implementation timelines of the Basel agreement in Europe. The box on pages 22-26 provides a status update on the implementation timelines of the CRR3 package in the EU and the Basel 3.1 package in the UK. The box also discusses the impact of the regulatory measures on banks' capital in the EU, the UK, and the US.

AFME has today published its Q4 2023 and 2023 Full Year Securitisation Data Report. Main findings: In 2023FY, EUR 213.3bn of securitised product was issued in Europe, an increase of 5.2% from the EUR 202.8bn issued in 2022. Of the EUR 213.3bn issued during 2023FY, EUR 94.7bn was placed, representing 44.4% of the total, compared to EUR 79.1 bn placed in 2022 representing 39.0% of the total. By asset class, placed ABS issuance increased to EUR 35.6 bn in 2023FY, up 78.0% YoY compared to the EUR 20.0 bn issued in 2022, which represented the lowest annual placed ABS issuance since 2010. In Q4 2023, EUR 42.2bn of securitised product was issued in Europe, an increase of 6.8% from Q3 2023 and a decrease of 35.6% from Q4 2022. Of the EUR 42.2bn issued, EUR 28.4bn was placed, representing 67.3% of the total, compared to the 65.3% of issuance in Q3 2023 and 17.7% of issuance in Q4 2022. Outstanding volumes (including CLOs) decreased to EUR 1180.6bn outstanding at the end of Q4 2023, a decrease of 0.17% QoQ but an increase of 4.05% YoY. Credit Quality: In Europe, upgrades comprised 90% of total rating actions by the main CRAs during Q4 2023, up from 78% of total rating actions during Q3 2023. STS issuance: In Q4 2023, EUR 18.4bn of securitised product was notified as STS to ESMA, representing 43.6% of the total issued volume in Q4 2023 (EUR 42.2bn). Out of the EUR 18.2bn in STS issuance, EUR 10.5bn was placed, representing 37.0% of total placed issuance in Q4 2023 (EUR 28.4bn). SRT issuance: Based on SCI data, quarterly SRT issuance in Europe reached EUR 21.7 bn in Q4 2023, a decrease of 17.8% from Q3 2023 and a decrease of 60.5% from Q4 2022.

Report highlights include: EU Member States and the UK issued EUR 743 bn in bonds and bills throughout 4Q23, which represents a decrease of 13% (QoQ) compared to 3Q23, and a decrease of 6% (YoY) compared to 4Q22. The UK had the largest nominal increase in total (bond and bill) issuance in 2023, with volumes up 47%. In Austria, volumes issued during 2023 represent the highest annual issuance in any year to date in the Austrian sovereign market. In 2023FY, European government bond trading increased 17% compared to 2022 and 35% compared to 2021, according to TraX data from MarketAxess. The traded amount in 2023FY was the highest average daily trading volume in European government bonds since records began in 2014, following consistently high trading volumes reported in all quarters of 2023. During 4Q 2023, European quarterly traded volumes increased 8% (QoQ) and increased 29% (YoY). Outstanding amount of European ESG government bonds reached EUR 441.6 bn during 4Q23. Volumes were driven by new green bonds issued by the Netherlands (EUR 5.2 bn) and Denmark (EUR 1.4 bn) and tap issuance by the UK (EUR 6.1 bn), the European Commission (EUR 4.7 bn), France (EUR 3.5 bn), Spain (EUR 2.0 bn), Italy (EUR 1.7 bn) and Belgium (EUR 0.8 bn). Austria issued an additional EUR 1.9 bn in green bills during 4Q23. There was a net gain of 1 primary dealer in Europe from October 2023 to January 2024. There were 4 exits and 5 entries of banks to European Primary Dealer systems affecting sovereign debt markets in 5 countries and the European Commission Primary Dealer Network (EU PDN). During 4Q23 there were3 long-term credit rating upgrades and 1 downgrade for European countries. This follows 3 upgrades and 1 downgrade in 3Q23, and 2 upgrades and 1 downgrade in both 2Q23 and 1Q23, bringing the 2023 full-year total to 10 upgrades and 4 downgrades. Most recently during 1Q24, Portugal has been upgraded by one notch and is now rated A-, which represents the strongest credit rating the country has held since 2010. The average bid-cover ratio (demand/amount allocated) was 2.2 in 4Q23, an increase of 7.7% (QoQ) from 3Q23 and an increase of 9.3% from 4Q22 (YoY).

The Report contains European leveraged finance end-of-year market trends for 2023. In particular, it includes issuance and credit performance data for the high yield and leveraged loan markets. Key highlights: European leveraged finance issuance (leveraged loans and high yield bonds) accumulated €249bn in proceeds in 2023FY, a 4.6% decline from €261bn in 2022. The decrease was driven by lower leveraged loan origination partially offset by a 45% increase in high yield bond issuance. High yield bond issuance reached €66 billion in 2023, up from €45 billion in 2022 but below the pre-pandemic annual average of c€100bn per year. High yield bond proceeds were primarily used to repay or refinance debt (€29.8bn or 45% of the total), or for general corporate purposes (€27.5bn or 41.5% of the total). LBO activity declined in 2023, with only 5.1% of proceeds flowing for such purpose (from 16.6% in 2022). The financial, customer discretionary, and communications sectors accounted for 61.6% of high yield 2023 issuance. Leveraged loan origination stood at €183bn, a 15% decline from 2022 (€216bn) The healthcare, computers and electronics, professional services, and telecommunications sectors led 2023 loan origination, representing 45% of proceeds. Credit Quality: S&P reported the trailing 12-month speculative-grade bond default rate at 3.47% in December 2023, an increase from 2.16% in December 2022. Moody’s reported the speculative-grade default rate at 3.55% in December 2023, down from 7.8% in December 2022 but up from 2.61% of March 2023 The European leveraged loan default rate (by value) reported by Fitch increased to 4.39% in 2023, up from 0.63% in 2022. 17 bond defaults were reported by Moody's and Standard and Poor's during the last quarter of the year. Defaults were mostly due to distressed exchanges and missed interest payments. According to Reorg, 93% of the European leveraged loan deals examined in 2023 were covenant-lite.