Following the publication of the EU-wide stress test results by the European Banking Authority today, the Association for Financial Markets in Europe (AFME) issued a statement on behalf of its members that participated in the exercise. Caroline Liesegang, Head of Prudential Regulation at AFME, said: “AFME welcomes the results of this year’s EBA stress tests. Despite an extreme ‘adverse scenario’ including high inflation, unemployment and a severe decline in EU GDP, plummeting by 6.3% over the 3-year period, this year’s stress test shows that the steps that both banks and supervisors have taken over the years to strengthen the resilience of the EU banking sector are persistently paying off. The stress test also showcases the ability of banks to implement the new Basel 3 requirements efficiently, despite their operational and capital impact. “The results reflect that banks operating in the EU have sustained high asset quality, with comfortable levels of capital, and solid profitability in a challenging geopolitical environment. Strong European banks are integral to weathering potential economic shocks as well as supporting the challenging transitions corporates and governments are facing. “Notwithstanding the overall positive outcome, we highlight the importance of comparable stress test exercises across jurisdictions. The severity of the market risk scenario in the EU, such as equity and FX shocks, is a much higher than those observed in other stress tests like the US CCAR. Comparability is in particular relevant for the next exercise which is anticipated with an integrated climate risk stress test component. The EU will take a leading role here, and it will be crucial that the results are communicated effectively by the authorities so as not to disadvantage firms part taking in the EU stress test. “We also urge the EBA to take a fresh look at the stress test methodology and remove, or at least recalibrate, some of the existing components that often override banks’ bottom-up projections. We also caution against further introduction of top-down elements in the stress test. The EBA stress test follows a constrained bottom-up approach, involving banks identifying risks using their own models to understand bank-specific issues and encourage better risk management practices. Supervisory standardisation via top-down models would jeopardise those important features. “We look forward to working with the EBA in further evolving the methodology for the 2027 stress test.” - ENDS -

The Association for Financial Markets in Europe (AFME) welcomes the wide range of reforms announced today as part of the UK Government’s ambitious 10-year strategy for financial services. AFME strongly supports the Financial Services Growth and Competitiveness Strategy, which recognises the importance that UK financial services play, not only in financing the real economy, but also in driving service exports. Adam Farkas, Chief Executive of AFME, commented: “AFME welcomes the UK Government’s renewed focus on capital markets as one of the priority sectors and supports the view that the UK can only achieve significant economic growth with well-functioning, deep and liquid capital markets. Achieving the benefits of this clear long-term vision will depend on close collaboration between the Government, regulatory bodies, and the financial services sector. “AFME has long called for a stable and predictable regulatory environment, and we welcome the sector strategy as well as the requirement for regulators to produce long-term strategies with clear goals and priorities. We also strongly support the focus on removing operational burdens, where appropriate, to make the sector more competitive.” International cooperation and simplification “We are pleased to see a commitment to prioritising reforms in areas where the UK remains an outlier internationally. AFME has consistently emphasised the importance of regulatory cooperation and convergence, especially between the EU and the UK, and we support efforts to simplify the UK landscape where the level of complexity is out-of-sync with other markets, for example, on cyber resilience reporting. We also strongly welcome the Government’s commitment to uphold international standards and to work with global standard setting bodies.” Digital Markets “We welcome the Wholesale Financial Markets Digital Strategy, especially the commitment to removing paper processes. These reforms, if implemented correctly, will not only improve operational efficiency and reduce risk but also support the UK’s broader goals around digital innovation and competitiveness. AFME has been a longstanding advocate on the need for full dematerialisation of shares, and already proposed several further measures, including encouraging electronic payments as default (e.g. for dividends), greater use of e-signatures, and the promotion of electronic communication methods as default. These modernisation measures are a critical foundation for the development and adoption of digital markets in the UK.” “A cross-sectoral approach to Distributed Ledger Technology (DLT), including the commitment to drive market adoption more broadly is an important step-forward. As part of this the UK Government should look towards a longer-term commitment to gilt issuances as part of the Debt Management Office’s regular issuance programme. The longer-term strategy for both the issuance of DLT based gilts and the creation of a regulatory framework that accommodates at-scale DLT-based capital markets is essential for the UK to become a leader in this technology.” Sustainable Finance “We strongly support the strategy for sustainable finance, including the commitment to prioritise policies that will have the greatest impact, . AFME looks forward to continuing our engagement with the UK Government to create an effective regulatory framework for sustainable finance, including the development of Sustainability Reporting Standards, transition plans and through our involvement with the Transition Finance Council. We agree that these measures, in conjunction with work to put in place the policies for companies to have the information, the tools and the incentives to adapt their businesses, should be prioritised over the development of a taxonomy.” Tax “The tax system has a vital role to play in supporting economic growth and competitiveness. A stable regime for financial services tax is important in this regard. The Government should consider removing disincentives to investing in capital markets, with the abolition of stamp taxes on shares as a long-term goal to encourage investment in capital markets.” Securitisation “Among all the measures announced today which aim to make a positive contribution to UK Growth, AFME and our members strongly believe that strengthening the securitisation market would have a significant impact on the UK economy - enabling increased lending to SMEs, facilitating infrastructure spending, and helping finance the net-zero transition. The inclusion of this sector, therefore, in the strategy would have been a valuable addition. However, we recognise the positive progress made so far on the UK securitisation framework, and since more consultations are currently pending, we look forward to continued engagement with regulators and remain committed to advocating for a robust securitisation market.” – Ends –

Following the Leeds reforms announced today by the UK Chancellor, Rachel Reeves, the Association for Financial Markets in Europe (AFME) welcomes the UK’s forward-looking approach and recognition of the strategic importance of the financial services sector for the UK economy. In particular, AFME strongly supports the Financial Services Growth and Competitiveness Strategy, reforms to make it easier for firms to raise capital in the UK, and the Prudential Risk Authority (PRA)’s decision to adjust the market risk framework. Adam Farkas, Chief Executive of AFME, commented: “We strongly support the UK Government’s ambition to make the UK one of the most competitive and innovative financial centres in the world. The launch of the Leeds Reforms sets out a long-term vision for the sector, recognising the crucial role that financial markets play in delivering growth across the whole economy. This is an ambitious 10-year strategy, which can only be delivered through a joined-up approach between the UK Government and the regulators.” “We welcome the continued work being done by the FCA to enhance UK capital markets, including improvements to the disclosure frameworks and measures to streamline the IPO prospectus timeline. However, we have concerns about the 75% prospectus threshold for further issuances and would have preferred to see simplified prospectuses for follow on offerings rather than a substantial increase in the threshold.” “Finally, we welcome the PRA's announcement to adjust the market risk framework. The previous announcement to delay implementation to January 2027 provided an opportunity to make targeted amendments to support the objectives of the Basel Framework and we look forward to continuing to engage with the PRA on this important topic.” “We also note the proposal to delay FRTB-IMA implementation, which reflects continued uncertainty regarding implementation in other jurisdictions. We encourage continued engagement between authorities to support international alignment.” – Ends –

Following the announcement today that ESMA have awarded the tender for the provision of an EU Bond Consolidated Tape to Ediphy (fairCT), Victoria Webster, Managing Director of Fixed Income at the Association for Financial Markets in Europe (AFME), said: “We welcome today’s appointment of the EU bond consolidated tape provider, which represents another milestone in the process ahead of go-live. We look forward to engaging with Ediphy (fairCT) in the course of our continued focus on post trade transparency, including the quality of trading data. “The EU bond consolidated tape will serve as a critical tool in enhancing and democratising access to post-trade information in the European bond markets. By consolidating trade data from multiple sources, the tape will provide market participants and investors with a comprehensive view of bond transactions, irrespective of their resources and level of sophistication, thereby improving price formation and discovery as well as market integrity.” While the approval process is underway, AFME supports Ediphy (fairCT) in initiating the implementation process as soon as possible, to ensure the consolidated tape can be promptly delivered. This initiative is expected to bring significant benefits to investors, issuers, and other market participants by providing timely and accurate information on bond trading activity. – Ends –

The EU T+1 Industry Committee has published its High-Level Road Map for the transition to a T+1 settlement cycle for securities on 11 October 2027. The roadmap contains a set of recommendations developed collaboratively by association representatives and workstream leads from various industry segments, and its technical workstreams, with broad industry representation. These non-legally binding recommendations are designed to serve as a practical, expert-led framework to assist market participants in identifying and addressing the most critical operational considerations and to support firms’ preparationsand budget allocations. Today’s release marks the culmination of five months’ work on the recommendations and the Industry Committee’s publication of the roadmap, which has also been shared with the EU T+1 Coordination Committee. The High-Level Road Map is available for download here: Shortening the settlement cycle to T+1 in the EU, and on the relevant industry associations’ websites. Giovanni Sabatini, independent chair of the EU T+1 Industry Committee, noted: “Today’s publication of the High-Level Road Map and the recommendations included therein marks the kick-off of a complex process to move EU and EEA markets to T+1 on the agreed date of 11 October 2027, in coordination with the UK and Swiss markets. We urge all market participants to review the recommendations, assess the impact on their systems and procedures and start planning how they want to prepare for the transition to T+1”. Sabatini added: “A key theme throughout this report is the imperative to enhance automation and eliminate manual interventions across all stages of the post-trade lifecycle.” The EU T+1 Industry Committee will host a launch event for market participants to discuss the recommendations on 3 July 2025. Register to attend the launch event virtually here: http://bit.ly/4nqBQhg

Commenting on the publication of the European Commission’s legislative proposal on Securitisation today, Adam Farkas, Chief Executive of the Association for Financial Markets in Europe (AFME), said: “We welcome the Commission’s legislative proposals that aim to address barriers to the development of the EU securitisation market. It is particularly positive that the Commission has adopted a holistic approach through a series of reforms. This approach has the potential to unlock the benefits of securitisation – an important financing tool that can contribute towards meeting Europe’s significant investment needs and support growth and EU competitiveness. In this regard, it is also encouraging that the Commission’s proposals acknowledge the current lack of sufficient risk sensitivity of the capital framework and the need to simplify due diligence and transparency requirements. “While the proposals are a step in the right direction, it is crucial to avoid introducing any measures that may inadvertently undermine the core objective of the reform to stimulate both demand for securitisation - through a growing investor base - and supply. Of course, a thorough assessment of the initiatives is still needed to understand the potential impact of the proposed reforms on the market. “As it is the first legislative initiative of the Savings and Investment Union strategy, it will be important that co-legislators take an evidence-based approach to the upcoming negotiations to help rebalance the financing structure of Europe’s heavily bank-based economy toward capital markets.” Following a preliminary review of today’s regulatory measures proposed by the Commission, AFME makes the following comments focusing on key positives and critical challenges to achieving the ultimate objective of effectively contributing to the Savings and Investment Union (SIU). In respect of the Securitisation Regulation (SECR): We strongly support the Commission’s intention to simplify the due diligence requirements under Article 5. For example, removing the requirement for EU investors to check the compliance of sell-side parties with the obligations stipulated in the SECR where the sell-side parties are based in the EU is a positive step in the right direction. However, these simplification efforts risk being undermined by the introduction of disproportionate sanctions, such as the ones which include fines of a percentage of global turnover. Not only will this measure discourage new investors from entering the market, but it could also end up driving currently active investors away, shrinking an already limited investor base. We also welcome the Commission’s intention to ease the reporting burden for banks by significantly reducing the number of required fields in the disclosure templates, which is likely to support increased issuance. However, we are concerned by the following two proposals in relation to Article 7: Broadening the definition of public securitisation: While the Commission’s intention to lower the reporting burden currently faced by issuers is helpful, this objective risks falling short if listing to EU trading venues is used as a distinguishing feature for defining public securitisations. If these listings are considered public, the additional unintended effect of doing this will likely be to drive listing away from the EU to foreign jurisdictions, and EU authorities’ oversight will decrease as a result. More generally, if the definition of public securitisation is drawn too broadly, a very limited number of private deals will see the benefit of the envisaged simplified template for private securitisations. In effect, the revised definition will impose the full extent of “public” reporting obligations on deals currently considered private, in which investors already receive all information required. This duplicative reporting requirement increases operational costs and creates yet another serious disincentive, this time, to issuance. Requiring private deals to report to EU securitisation repositories: Any requirement that private securitisations report to securitisation repositories would also have an adverse impact on issuance. This will increase both compliance and transaction costs. For example, it will particularly discourage first time issuers who may be considering using securitisation to fund their early-stage growth. In respect of third-country deals, EU template requirements already disincentivise non-EU clients from using EU banks, so requiring them to also report to EU securitisation repositories as a result of an EU investor’s participation in the transaction would have the effect of increasing the regulatory burden even more and add further complexity to the reporting regime. In this regard, we welcome the recommendation of the Joint Committee of the ESAs in the Article 44 Report of 31 March 2025 not to require third-country securitisations to report to an EU-registered securitisation repository. In respect of the prudential framework: We welcome that today’s proposal acknowledges that the current prudential framework creates undue barriers for credit institutions to issue and invest in securitisation. However, and subject to further analysis, AFME cautions against changes to bank capital treatment that would unintentionally inflate capital charges beyond current levels under the current regime for banks in any role. In relation to the concept of resilient transactions - which represents an additional layer of complexity and comes on top of the Single Transparent and Standardised (STS) label - it is crucial that the cost of complexity is countered by appropriate capital benefits impacting a meaningful proportion of the market. We support the fact that the Commission decided to address the treatment of securitisation under the Liquidity Coverage Ratio (LCR) and the opportunity to contribute to the consultation on the proposed changes to the delegated act. While AFME will develop further views in the coming weeks, our initial observation is that the benefit attributed to STS or resilient eligible transactions falls short of the ambition indicated in other areas of the proposal. With respect to Solvency II, it is positive that the Commission also intends to introduce reforms that support the return of insurers as investors in the securitisation market. It is indeed particularly needed to recalibrate capital charges for non-senior STS and non-STS tranches for this category of investors. We look forward to the upcoming consultation on the Solvency II Delegated Regulation. – Ends –

Following the adoption today by the European Commission of the Delegated Act to delay the implementation of the EU’s market risk framework by another year to 1 January 2027, Caroline Liesegang, Managing Director, Head of Capital & Risk Management at the Association for Financial Markets in Europe (AFME), commented: “AFME supports the Commission’s decision to delay the implementation of the market risk (FRTB) framework, given the need for further clarity on both substance and timing, as well as the need for alignment between jurisdictions, which is especially important for internationally-active banks. This is key to avoid unnecessary regulatory fragmentation. We also welcome the Commission’s clarification that last year’s communication package and related SSM/EBA guidance is not expected to change. Given the operational complexities and costs that some banks face for the maintenance of the current internal models, we welcome the flexibility provided for supervisory authorities in their assessment of current internal models. “However, further work remains to be done. Long-standing concerns remain within the market risk framework and will need addressing through targeted amendments to the framework. The Commission initiated its thinking on these changes in its recent consultation and we would strongly encourage work to continue progressing on this workstream in collaboration with the industry. We look forward to continuing dialogue with the Commission, the EBA and SSM as these issues evolve and as the broader international picture becomes clearer.” – Ends –

With the deadline for the Commission’s wide-ranging consultation on the integration of EU capital markets closing today, Adam Farkas, Chief Executive of the Association for Financial Markets in Europe (AFME), said: “AFME’s members share the EU’s ambition of building deeper and more liquid markets that are competitive on a global level. The EU has a moment of opportunity to attract global capital and must focus efforts on targeted, evidence-based policy proposals, that focus on growing demand from all investor types and upholding the principles of competition and user choice. However, we are deeply concerned that some of the proposals related to equity market structure contained in the consultation are not conducive to this end. On the contrary, we believe that measures which would reduce the complexity and high frictional costs of the current post trade ecosystem should be prioritised, and call for ambitious and innovative thinking to unlock competition in this space. We look forward to exchanging views with the Commission on this further ahead of the expected legislative proposal later this year.” In AFME’s response it: Cautions against changes to market structure AFME emphasises that the EU is unlikely to achieve its shared ambition for growth by fundamentally changing the regulatory framework for equities trading through replicating the market structure features of other jurisdictions (with different geographies, legislative frameworks, issuer and investor bases, and political priorities). Any radical changes to microstructure (such as the idea of introducing an order protection rule) would be highly undesirable and risk portraying the EU as being in a state of constant regulatory flux. Especially at a moment when investors - including those newly attracted to Europe in light of recent geopolitical trends - wish to navigate markets characterised by regulatory stability, predictability and consistency. Such detrimental changes would also burden market participants with considerable implementation and compliance costs. Emphasises the need to promote measures that will generate investor demand for EU securities AFME emphasises that building deeper and more liquid securities markets in the EU is a ‘demand’ issue and goes far beyond market infrastructure issues. Addressing this will require decisive action across Member States to build their supplementary pension systems through promoting an investment culture and financial education, as well as taking further steps towards harmonising tax and securities law frameworks. Calls for a streamlined EU regulatory framework AFME emphasises its support for a streamlined EU regulatory framework, making markets easier to navigate without compromising on safety and investor protection. The Association calls for an in-depth assessment of how the Lamfalussy process is functioning in view of the EU putting in place a more agile and effective regulatory and supervisory approach for globally competitive banking and capital markets. Calls for policymakers to prioritise access to markets for all investors Access to markets should be made more cost effective for all investors, and policy makers’ focus should therefore remain on addressing barriers to entry, such as the market failure in market data being available on a reasonable commercial basis, and inefficiencies in the post-trade ecosystem, which add unnecessary frictional costs to all market participants. Supports improving competition for post-trade financial market infrastructure services Several influential recent reports (Draghi, Noyer, Letta) have identified that the post-trade financial market infrastructure in the EU is complex, fragmented and suffers from a lack of competition between providers. AFME supports this analysis and believes that improving competition for the provision of post-trade financial market infrastructure services should be the critical objective of the new legislative proposal. Achieving this requires a multi-faceted approach. An important first step is increased regulatory scrutiny on the pricing of post trade services - for which incumbents have a quasi-monopolistic position - ensuring that they are fair and transparent. More ambitiously, the creation of a common issuance layer, potentially leveraging T2S,could be considered, as well as further exploration of potential new, innovative post trade models based on Distributed Ledger Technology (DLT). – Ends –

A significant milestone in the implementation journey was reached as the Committee reviewed a first draft of recommendations with capital market representatives The EU T+1 Industry Committee, chaired by Giovanni Sabatini, met in Brussels on Wednesday, 28 May, marking a significant milestone in the implementation journey towards a default T+1 securities settlement cycle. The Committee reviewed a first draft of the consolidated report of the recommendations of the Technical Workstreams with representatives from across the capital markets ecosystem. The recommendations will form the basis of a report, which is due to be published by the end of June 2025, of the blueprint of the changes that the EU T+1 Industry Committee believes must be collectively delivered to ensure successful delivery of the T+1 project. Key outcomes from the session: · Alignment on the recommended new “daily operational timetable” for “gating events” · Consensus on the governance framework for ensuring public-private collaboration · Agreement on the technical workstreams' preliminary recommendations · Clear next steps for finalising our report by June 2025 The EU T+1 Industry Committee has appointed PwC as an external consultant to support the significant coordination effort required for the T+1 initiative. All participants reinforced the urgency of preparation with Sabatini commenting: “As we progress toward our final recommendations, market participants must begin strategic planning and investment decisions to prepare for the October 2027 transition date.”

Commenting on the conclusion of the first EU-UK summit held today, Adam Farkas, Chief Executive of the Association for Financial Markets in Europe (AFME), said: “The positive outcome from today’s first EU-UK summit is a significant step forward in renewing and strengthening the bilateral relationship between the European Union and the United Kingdom. The summit has achieved meaningful progress in critical areas - defence, energy, and security. We hope that these commitments will pave the way towards future discussions for cooperation in other areas as well. Both the EU and UK could benefit from increased cooperation in the field of financial services. Reducing operational frictions for financial services firms who operate across both jurisdictions will bring significant economic benefits and we look forward to engaging in conversations on how this may materialise in practice over the coming years. “More specifically, AFME welcomes the decision to begin work towards linking the UK and EU Emissions Trading Systems. A linked carbon market would support liquidity, improve market efficiency, and strengthen the carbon price signal across both jurisdictions, helping accelerate the transition to net zero.” – Ends –