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LIBOR Transition: Managing the Conduct and Compliance Risks
18 Dec 2019
SinceAndrew Bailey’s speech in 2017banks have had to prepare for the reality that after 2021, the London Interbank Offered Rate (LIBOR) – one of the world’s most important reference rates - might cease to exist. As part of industry preparation, regulatory authorities have been working with market participants to transition away from the use of LIBOR to risk-free rates; however, this transition also poses significant conduct risk. The term “conduct risk” can be broadly defined to mean the risk that actions taken by a firm could be detrimental to a client or have an adverse effect on market stability or effective competition. As a result, AFME and Simmons & Simmons have together highlighted questions which compliance teams should ask themselves concerning their LIBOR transition preparations in order to mitigate conduct risk. Read the paper forall the details Overview Firms should review theirstructure and governance frameworksas this will define how they approach the transition and manage their relationships with external parties and key decision-makers. Given the scale and complexity of the transition, firms should review theirrecord-keepingprocesses to ensure they remain compliant when large volumes of documents are produced. Review whether the organisation issuitably engaging with regulators and working groupsso its responses to consultations are as informed as possible. Firms should review whether their new risk-free-rate products are compliant under regulatoryproduct governance obligationsand access the viability of any new LIBOR-referencing instruments. Determine whethercommunicationsteams are suitably addressing client needs and their varying levels of understanding of the transition. Take steps to ensureoutsourced servicesare compliant with regulation. Ensure allbusiness divisions are suitably trainedand aware of the firm’s regulatory and legal obligations. Reviewpost-transition communications processesto determine if they are prepared for potential questions and complaints from clients regarding new risk-free-rate linked contracts.
Rebecca Hansford
Capital Markets Union – Key Performance Indicators (Second Edition)
16 Oct 2019
Available inFrench,German,ItalianandSpanish. This second edition of AFME’s annual report tracks the progress of the Capital Markets Union (CMU) project through eight Key Performance Indicators (KPIs). It is a joint publication with ten trade associations and international organisations representing global and European capital markets stakeholders. The report includes a country-by-country comparison of individual EU Member State progress against the CMU’s objectives.This year’s report also includes a new indicator measuring how well EU countries aredeveloping their FinTech ecosystems. Key findings include: Europe strengthened its global leadership in sustainable finance - Issuance of sustainable bonds increased 16% in the EU during 2018 to €69bn, an increase of €9bn compared to 2017. The EU 27 lags behind on FinTech funding - EU27 FinTech companies have only benefited from $7.2bn in investments (venture capital, seed, angel and private equity) since 2009, compared with $120bn in the US, $23.8bn in China and $20.3bn in the UK. Europe’s reliance on bank lending has increased - European 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 – a decline from 14% on average in 2013-2017. As the EU begins a new political cycle, there is an increasing focus on the need to further develop the Capital Markets Union. While some of our report’s indicators show a positive trajectory since last year’s results, such as Europe’s global leadership in sustainable finance, it is clear that there is still much work to be done at European and national levels, particularly on making Europe’s capital markets more competitive. The 2018 first edition of the report can be foundhere.