AFME > Publications > Reports

Share this page
Sustainable Finance in the EU: Priorities to unlock financing and investment
16 Nov 2023
The Association for Financial Markets in Europe (AFME) has today published a new report 'Sustainable Finance in the EU: Priorities to unlock financing and investment'. The paper outlines AFME members’ views and recommendations on the functioning of the current EU sustainable finance framework and the implementation challenges that banks face in applying it to financing companies. The paper then highlights AFME’s constructive recommendations for policymakers, including how policymakers and regulators can further enable financial institutions in providing financing in support of climate, environmental and social goals. The report sets out five priority recommendations to address identified challenges: Maintain focus on establishing roadmaps, reducing regulatory barriers for the deployment of sustainable investment projects and providing incentives for the real economy transition; Ensure that the regulatory framework is achieving its goals, is coherent and usable in practice to promote and support sustainable finance (including transition finance); Provide a stable regulatory framework with time for implementation and review how it is working in practice, with targeted guidance/changes introduced where needed in consultation with market participants; Ensure that regulation is promoting investment and does not adversely impact the competitiveness of financial institutions or companies operating in the EU and internationally; and Enhance international coordination and improve international interoperability with other key jurisdictions. Alongside recommendations on improving the functioning of the EU regulatory framework, the report also sets out AFME’s recommendations in three further important areas which we see as priorities for EU policymakers: Facilitating transition finance; Developing carbon markets; and Scaling finance for nature.
Capital Markets Union Key Performance Indicators – Sixth Edition 2023
9 Nov 2023
Press releaseavailable inEnglish, French, German, Italian, Spanish Individual country analysis available for France, Germany, Italy, Spain The Association for Financial Markets in Europe (AFME), in collaboration with eleven other European and international organisations, has today published the sixth edition of the'Capital Markets Union – Key Performance Indicators'report, tracking the progress of Europe’s capital markets against nine key performance indicators. This year’s report shows a mixed picture, revealing no discernible medium-term advancement on the CMU key performance indicators. This edition also coincides with the 30th anniversary of the Single Market. Here too, the data points show minimal change in the development of the EU's capital markets on a global scale. Adam Farkas, Chief Executive of AFME, said:“All the planned measures from the CMU Action Plan of 2020 have now been delivered by the Commission and EU leaders earlier this year committed to finalising negotiations on any open CMU issues before the next EU elections. However, certain goals, such as rebalancing the EU's funding sources toward more market-based financing, channelling individual savings into productive investments, and integrating national capital markets to create a unified EU market have not yet materialised to any meaningful degree. “It is clear that the financing structure of the EU economy will need to adapt, and at pace, if it is to support the EU’s significant and transformative investment needs, including the fast-approaching climate goals of 2030, as well as its demographic and competitiveness challenges. “Ahead of the next legislative cycle commencing, a strategic discussion on the best way forward will take place within the Eurogroup to set out recommendations for the next Commission. These recommendations are highly anticipated by the capital markets industry. The growth of an integrated capital market for Europe must continue to be a key priority if the European Union is to achieve its dual goals of sustainable and digital economic transformation.”
Decentralised Finance - Principles for building a robust digital economy
6 Jul 2023
AFME is supportive of the development of a thriving digital economy within a clear legal and regulatory framework. As these frameworks continue to emerge around the globe, we believe that this is a crucial moment for the financial services industry and regulators to mitigate risks and prevent any unintended gaps in regulator perimeters. In particular, we believe it is crucial to avoid the potential exclusion of so-called “decentralised activities” as this could open opportunities for regulatory arbitrage and weaken the application of emerging frameworks. This exclusion could create unintended risks to financial stability and potential knock-on impacts. While as noted by the Financial Stability Board (FSB) the current overlap of DeFi and Traditional Finance (TradFi) is not yet significant, this should be actively monitored and managed. Our white paper discusses the following principes: The importance of developing a foundational taxonomy classification mechanism for DeFi (and DeFi activities) as well as digital assets. Further research and global cooperation should be encouraged to determine the appropriate, proportionate, and comprehensive regulatory solutions for the unique challenges posed by DeFi. It is crucial to leverage existing processes and frameworks to create a holistic regulatory perimeter. Our paper includes recommendations for: Requiring authorisation prior to conducting regulated financial activities; The importance of choosing an appropriate accountability structure; An initial industry view on establishing a risk-based approach to DeFi; and Support for a ‘Level Playing Field’ and working towards consistent regulation despite varying levels of centralisation. However, in discussing these principles it is important to note that this area of the market is still rapidly evolving and changing. This paper is not intended to be a definitive solution to the challenges posted by DeFi. It is instead a foundational piece of work to further explore some of the technical issues posed by this new area of digital finance, as well as raise some initial proposals on how DeFi could be addressed from a regulatory standpoint. We aim to open an initial discussion across industry on this topic, and look forward to continuing to work on innovative policy solutions for DeFi with both the public and private sector, especially as we look ahead to the Regulatory Technical Standards (RTS) for the Markets in Crypto Assets (MiCA) Regulation, and eventually MiCA 2.
A Common Path to Improve European Climate Risk Stress Testing and Scenarios Analysis
22 Jun 2023
The Association for Financial Markets in Europe (AFME) and Oliver Wyman have today published a new report entitled “A Common Path to improve European Climate Risk Stress Testing and Scenarios Analysis”. The report outlines the key challenges EU banks are experiencing surrounding climate risk stress testing and provides recommendations to improve future stress tests. The report finds that, since the last ECB climate risk stress testing exercises, banks have developed sophisticated approaches to improve their understanding and analysis of climate risks internally, taking inspiration from lessons learned and supervisory guidance in place. The report discusses key highlights from banks’ experience and understanding so far, while outlining areas of focus to improve future climate stress tests and scenarios analysis. Following a survey of 15 of AFME’s member banks and engagement with relevant regulatory and supervisory authorities, such as the ECB, EBA and the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), the report highlights key challenges that EU banks are currently experiencing in terms of: scope, data, time horizons, scenarios and different risk types. The report also provides several recommendations for policymakers in order to improve future climate risk stress tests and scenarios analysis. In this respect, AFME’s member banks suggest further supervisory provisions, including: materiality thresholds, consistent data governance framework and collection guidance, meaningful and quantifiable scenario analysis (not solely limited to credit risk) with shorter time horizons, and a framework for nature-related risk considerations in line with the work of the TNFD and NGFS. The paper follows a previous AFME publication on industry learning from the 2022 ECB climate stress testand aims to bridge efforts of banks and policymakers to improve climate risk stress testing methodology and data. AFME urges further collaboration between banks and policymakers to engage on meaningful solutions, in line with the detailed recommendations set out in the report.