response to european commission green paper – … 2 rue de brussels 25 june dear sir barclay...
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Europea2 rue deBrussels 25 June Dear Sir BarclayFinanci BarclaysTerm Fi Barclaysto largeour custlendinginvestor In answmarket considestructurand undinvestor Some o
an Commisse Spa s 1000
2013
r/ Madam,
ys’ responseng of the Eu
s welcomesinancing of
s is a univere capitalisedtomers and and non-bars in private
wering the Costructures a
ered in orderes of the noderstandingr demand.
f our main o
The role ofsupporting banks have serve, and wuniversal baclients of diinstrumentsmechanisminvestors, ainstitutionaNon-bank fmet fully th
sion – DG M
e to Europeauropean Eco
the opportthe Europe
rsal bank wid companies clients withank lendingely placed or
onsultationand productr to answer on-bank len
g should lead
observation
f universal blong term fevolved in
well-run unianking modifferent sizes. Universal
m for financeand throughal investors. financing: Ithrough bank
MARKT
an Commissonomy (the
tunity to resan Economy
th a diverses. Through th solutions t markets (i.r publicly tr
, we have prts in both bthe policy q
nding marked to increas
ns:
banks: Univefinancing, aresponse toiversal bank
del enables bes and sophi
banks will ie using theirh their branc
t is clear thak lending. D
EU Tra
sion (the “Ce “Consultat
spond to they.
e range of cuthe breadthto all their fe. raising lo
raded marke
rovided as wank and noquestions aset can improed activity,
ersal banks lthough the
o the producks are able tbanks to resistication thimportantlyr own balanch networks
at the needsDuring times
ansparency
Commissiontion”)
e Commissio
ustomers an of our fran
financing neoans or debtets).
wide a viewn-bank marsked. In genove and expwhich will i
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spond to spehrough offery continue tonce sheet, ass and existin
s of the busis of econom
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would like tont Vice Pres
incerely,
Ardalan airman, Hea
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elieves that na funding enwidely recogd should be through resUK househoainst a mar
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m non-banky current reng: Banks w
ources of invsuitable for tap. This ro
uire banks totory proposcuritisation Regulation srentiate betrom other f
y aspects ofernment Rel
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m of financened. As a resctions. This mparticularly lternatives mt as diverse aSMEs are th
nt policy focnding. In 20
sinesses. Ou: Our growtn the wider ty of the lonole in develok finance. Itegulation. will continue vestment in r the investoole is likely oo identify altsals put fort
Frameworkshould not ctween assetforms.
f this in furtations, (edm
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e for many sult, bank demeans it canthose inves
must be an and high quhe most likecus. Barclay012, we prour lending toh rate of lenmarket. Alt
ng term finaoping innovat is clear how
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or bases thaonly to increternative soh in the Bask Consultaticlass all secuts, and inste
ther detail pmund.j.lakin
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companies. ebt can be hn be an unssted in innovequal focus
uality as smaely drivers oys is commitovided £44bo SMEs has nding to SMhough it is cncing gap inative solutiowever that
active and irket as they at banks’ disease as add
ources of funsel Committon at the muritisations ad should re
please contan@barclays.
nt Relations
At other timhighly cyclicuitable toolvation rich s
s for policy mall businessef economic tted to supp
bn in gross ncontinued t
MEs over theclear that bn the EU, thons to innovation
mportant roidentify fina
stribution itional capitnding. tee on Bank
moment poseas the sameecognise hig
act Edmund com).
mes cal – for sectors. makers es.
porting new to
e year to ank ese
in this
ole in ancing
tal
ing e a real e, gh
Lakin,
Broadlyfocus ofthough requireminvestmfinancin Althougsufficiendiffering For exawithin rhigh thrdevelop But it isthe EU, access frespons For thesalternatUnfortu Barclays It is, thefor finanincreasilater qu “Meetabcriteria.one of tproposicustomto identnon-ban It is cleathe US. triangledispropsignificaR&D or believe
1) Do you acharacteris
y speaking Bf the Europeit is import
ments. In Eument differs ng, and the
gh it is clearntly diverse g forms of f
mple, traditresponsible roughout re
pment requi
s clear that tand there r
finance is cosible lending
se customertives, the de
unately, in m
s believes th
erefore, vitance. The latingly even le
uestions).
ble demand. Where a retwo situatioition is best ers who aretify changesnk finance i
ar that in Eu Within the
e” of Londonportionate nant tangibleare focusedthat these t
agree with tstics of long
Barclays is inean Commistant to diffeurope, bankacross the sgeography
r that the cuto meet the
finance, and
tional bank lending crit
ecent years.iring debt fi
these two memain custoonstrained. g.
rs, non-banesign of whimany instanc
hat this non
al to distingutter represeness able to s
d” describesequest for d
ons has occufinanced th
e not a viabls which cous not only m
urope there UK, this is pn, Cambridgumber of th
e assets or cd on technotypes of firm
the analysisg-term finan
n agreemenssion towarrentiate wit
ks’ role – andsize and typthe transac
urrent busine needs of a
d between th
lending for teria, and ac Additionalnance on te
markets cannomers who Much of thi
k finance anch are apprces these so
n-bank finan
uish betweents a markeserve becau
requests fodebt financeurred – eithehrough anote propositiold be made.
more access
is a lack of particularly ge and Oxfohese firms recash flow (e.ology opportms represen
s set out aboncing?
t with the ards encouragthin the anad appropriae of the bortion is occu
ness financinall customerhe differing
SMEs remacceptance rally, many coenors availa
not address are unable tis demand d
nd equity inropriate for ources of fin
nce and equ
en “meetablet that bankse of chang
or debt finan does not mer the custother form ofon for finan. For the sesible but the
alternative true outsid
ord. Some haeside in hig.g., becausetunities thatt significant
ove regardi
analysis, andging sustain
alysis betweeateness - in prrower, the
urring within
ng environmrs, it is impo needs of cu
ains effectiveates for the
orporates arble in the m
the totalityto access fin
does not sat
particular atheir needs
nance are no
ity gap is a
e demand” s have not t
ges in regula
nce from cumeet these romer proposf finance – ece, it is oftecond group
e better fina
financing ode of core arave correctlh-growth se they are int are in a prt long-term
ing the supp
d we welcomnable growten small andproviding fipurpose an
n.
ment is not cortant to disustomers.
e for those cse customere able to fin
market.
y of financinnance, or wtisfy banks’
are fundam and risk prot fully acce
deeply sign
and “non-mtraditionallyation, amon
ustomers whisk criteria, sition is not e.g., equity. en possible tp, it may be ancing optio
ptions, espereas such asly identifiedegments thavesting sign
re-revenue p economic b
ply and
me the curreth. We do fed large finanancing ford structure
currently stinguish be
customers wrs have remnance their
ng requiremhose abilityrisk criteria
entally improfile. essible.
nificant chal
meetable dey served andg other thin
ho meet banin our expeviable; or thFor those
to work withthat alterna
on of their n
ecially comps the “Golded that a at do not hanificant amoposition). Wbenefits to t
ent eel ncing
r of that
etween
who fit mained
ments in y to for
ortant
lenge.
mand” d are ngs (see
nks’ risk erience he
h them ative; needs.
pared to n
ave ounts in
We the
Europeafinance Equity iwith vohave rig We therforms o
We see years. Afinancin Howevelifetimesignifica The lattto have repaymmay be We wouas a quewhethe
We belifinancinof thoseand finatheir cumanagemore ex Assumiimplemthe end
an economy.
nvestment latile (or no
ghtly champ
refore welcoof long term
2) Do you h
the simplesAnother posng, which w
er, an impore of a specifiant develop
ter requiremassets agai
ments. This ispre revenu
uld thereforestion of ther the “gap”
3) Given thsee for ban
eve that unng. Universae they serveancial servicustomers ane their balanxpansive len
ng the macmented as cud “user” of th
Large Cap atypically haequity markfinance inveexample whan arm’s len
y; but their
is thereforeon-existent) pioned.
ome this Com finance to
have a view
st definitionssibility wou
would then c
rtant distincic asset, or t
pment, start
ment is best nst which tos particularle for a num
re encourage form of risin the EU is
he evolving nks in the ch
iversal bankal banks hav
e: they have ces requiremd for societ
nce sheet annding activit
ro-economiurrently exphe finance. W
and Multi Nave relativelykets represeestment. Mhen engaginngth basis. H
business mo
e vital as it isearnings. It
onsultation asupport exi
w on the mos
n of long-teruld be to defapture both
ction is betwto provide cup or owne
met througo secure a loly material i
mber of years
e the Commsk and oppos principally
nature of thhannelling o
ks will contive evolved idiverse clie
ments. Well-ty as a wholend use debt ty.
ic outlook rected, we bWe provide
National Cory little relianenting their
MNCs may usng in MergeHowever, th
odels are no
s structuredt represents
as a means sting bank f
st appropria
rm financingfine it as theh developme
ween financcash flow, anership risks.
gh equity finoan, or a revin innovatios.
mission to coortunity tha
one of equ
he banking of financing
nue to play n response
ent and cust-run universe. For examcreate capi
emains uncelieve the ro
e some exam
rporates (conce on bankprimary so
se direct boer & Acquisithese are ofte
ot typically s
d to absorb ts the type of
of considerfinance mar
ate definitio
g as financine useful life ent financin
ing which isnd financing
nance, whicvenue strea
on rich secto
onsider theat the financity risk.
sector, going to long-te
a vital role to the prod
tomer basessal banks pr
mple, the flextal and fund
changed andole of banks
mples:
ollectively “ks for directurce of long
orrowing frotion activityen refinance
suited to tra
the uncertaf “patient ca
ing equity arkets.
on of long-t
ng with a mof all assets
ng and long-
s designed tg which is d
h does not ram to meet ors like high
long term fce is designe
ng forward,rm investm
in supportiduct and sers which haverovide a ranxible way in ding synerg
d banking res will evolve
“MNCs”) act finance, wig-term coreom banks sey or when fued in the pu
aditional ba
inty associaapital” whic
and other no
term financ
maturity oves which requ-term finan
to match thedesigned to a
require a cointerest
h technology
finance chaled to suppo
, what role ments?
ng long termrvice requiree diverse bage of benefwhich theyies, which p
egulation is e, depending
ross Europeith the bond
e funding uselectively, founding a proublic bond m
nk debt
ated ch many
on-bank
cing?
r 5 uire cing.
e absorb
ompany
y, which
llenge rt, and
do you
m ements anking fits for y can permit
g upon
e d and sed to or oject on
markets
In addithave siginvestmof liquidrecogni
in due courlines that minvestment and these wMNCs. Fromintermediarinvestors viMNCs increfunding deb For Small asource of dfrom banksgeographiepivotal rolehelping to bfund long-tmechanismrelationshipequity-like relatively nehowever, baSMEs.
Banks’ role projects is lsuch as the costs to banlong tenor are expectethis marketbases that bgenerally hprojects ancarry out duexpected toby providinconstructioinsurers materm projeclong term in
tion, we wougnificant im
ments. The Cdity and strused in the C
A more benthis econom
rse. MNCs mmay be partit plans. We will increasinm a financinries to arrana the privat
easingly divebt via the bo
and Mediumebt funding
s for SMEs ves to suppore in financinbring third pterm investm
m for financeps and therefinance in sew entrantsanks will rem
in providinglikely to redamended B
nks from bo(often 10yr
ed to play ant as they idebanks’ distriave little risd may not tue diligenceo have a roleng contingenon phase of tay prove to cts and for fnfrastructur
uld like to cmplications foConsultationuctural sepaConsultation
neficial risk mically vital
mainly rely oally drawn, believe ban
ngly becomng perspectnge and distte or public ersify away ond market
m Enterpriseg for investmversus other rt local SMEg for the SMparty investment at the e, both throe may be ansome way. Ns in to the mmain the m
g long termduce in the fBasel rules, aoth a capitals+) many ofn active roleentify financibution capa
sk appetite dtypically have or monitoe in facilitatnt support, the project.be an impofinancings bre investme
omment onfor their rolen rightly recaration. Hown which wou
weighting factivity;
on banks fobut which d
nks will conte the domin
tive, MNCs ptribute debtmarkets. Wfrom direct
ts.
es (SMEs) diment. Given
sources, an investment
ME sector. Wtment in to corporate lugh the bra
n enhanced Non-bank inmarket and a
ajor source
m finance forfuture, as neand structurl and fundinf these projee in bringingcing opportuabilities areduring the cve the skills r the asset i
ting the provco-lending . The pool ortant source
backed by goent.
n some of the in the chanognises som
wever, someuld be releva
for SME deb
r backstop ldo not formtinue to provnant form opredominant and equity
We expect tht funding fro
irect borrown the relativend the concet, we expectWe also beliSME lendinglevel. Banks anch networrole for ban
nvestors andare expectedof debt fina
r investmenew and planral changes
ng position.ects requireg alternativeunities that
e able to tapconstructionor resource
in constructvision of insand/ or mo
of infrastructe of financeovernment
he challengennelling of f
me of the che regulatoryant:
bt to address
liquidity andm part of a M
vide these uof primary bntly rely on by financing this role to gom banks to
wing from be accessibilierted effortt banks to cieve there isg, which in offer a uniq
rk and existnks to offer ad online fundd to grow inancing for in
nt in infrastrned regulat in the UK a This is prim
e financing fe sources ofare suitable
p. Institutionn period of ies to structution. Banks astitutional lo
onitoring duture funds,
e, both for trguarantees
es facing bafinancing to
hallenges facy changes ha
s the capita
d working cMNC’s core undrawn facank exposubanks as to third partrow as Euro
o longer ter
banks is the ity of financs by banks iontinue to ps a role for bturn will beque distribuing client access to eqding platforn importancnvestment b
ructure andtory requireand EU, heigmarily drivefor. Banks hf investmene for the invnal investorinfrastructuure the finanare thereforong-term fi
uring the pension funraditional lo which supp
nks which mo long-term cing banks iave not bee
l implicatio
capital
cilities re to
ty opean m
primary cing in some play a banks in e used to ution
quity or rms are ce, by
d other ements ghten n by the
however nt in to vestor rs ure ncing, re also nancing
nds and ong port
may
in terms en
ns of
In particmake it limited indirect Over reregulatowere disincentivtend to portfoli The ComGroup (the longopportucustoma sourceand breprovide It is oursuccessfundamCRDIV i We belibanks olikely toincreasiacknow It also vfor largalready
The exemptCRD4/CRR)BCBS236 wpotentially
cular, we art more expeto ABS of S
tly) to capita
cent years wory capital csproportionvise a re-entbe quite divo will not b
mmission’s (HLEG) on rg-standing uunity for somers throughe of stability
eaking up sue through th
r view that tive capital a
mental reviewis implemen
eve that theoperate a rano reduce theing the cost
wledges in its
vitally impore banking gtaking plac
4) How couthe financinbetween thinstrumentinvestment 5) Are therof long-ter
tion from th);
which would making ma
re concernednsive for ba
SME loans). al markets i
we have scacharges for nately high. try into this versified ane for a perio
Consultatioeforming thuniversal bame institutioh such a moy and providuch banks inhe cycle serv
the resiliencand liquidityw of the tradnted.
ere is no “onnge of busine efficiency ts to househs report.
rtant that stgroups, and ce in Membe
uld the role ng of long-t
hese banks its under thet in sustaina
re other pubm investme
he CVA vola
significantlrkets) in sec
d that the panks to hold
Such securnvestors.
aled back ousuch positio It is unclea market. Wd stable (frood of some
on also commhe structureanking modons to choodel. Diversifded much nnto separatevices to the
ce of banks hy requiremeding book b
ne size fits aness modelswith which
holds and co
tructural septhe EC shou
er States, an
of nationalterm investin the pursue EU budgetable growth
blic policy tent?
atility capita
ly increase ccuritisations
proposed amd and trade aities would
ur involvemeons (at least
ar whether aWhilst a matu
om a P&L/cyears.
ments on the of the EU bel in Europe
ose to providfied busines
needed fundely funded eEuropean e
has been sigents reformsby the Basel
all” solutions. We are cofinancial se
orporates, so
paration should take accnd where th
l and multiltment? Is thuit of EU pot better suph?
tools and fra
al charge fo
capital chars.
mendments asset backedgive smalle
ent in the pt under the a harmoniseure portfoliocapital point
he recent rebanking secte and the vade a wide rass models anding to the eentities will ueconomy.
gnificantly es and will co Committee
to a diverseoncerned thervices can bomething w
ould not cutcount of thehese exist.
ateral devehere scope flicy goals? Hport the fin
ameworks t
r SMEs (bot
rges for ban
to the secud securities r firms acce
rivate equitUK implem
ed EU capitao of such int of view) a
port of the tor. We bel
alue of preseange of finand geographeconomy thundermine
enhanced sinontinue to be reaches its
e EU bankinat structura
be providedwhich the HL
t across the structural r
lopment bafor greater cHow could fnancing of l
that can sup
th set out in
ks holding (
ritisation ru(including
ess (albeit
ty area as thentation of
al treatmentvestments wnewly creat
High-level Eieve in the verving the ncial servicehic footprinroughout ththeir ability
nce the crisbe enhanceds conclusion
ng sector in al restriction, materially
LEG also
e resolvabilitreform initia
anks best sucoordinatiofinancial ong-term
pport the fi
n
(and
ules may but not
he Basel 2)
t will would ted
Expert value of
es to nts were he crisis y to
is via d as the n and
which ns are
ty plans atives
upport on
nancing
We cho Nationainvestorprovidin If such bsponsormay nonecessa Over timconfidedevelopresourc
Institutiof all tyinsurersEquity Mdriver o While inmanageinvestm The instmakinginstituti As an exoversigh We wouinvestorcorpora
This quinvestin
ose to answ
al and multirs and can png new sour
banks were rs of issuanct currently
ary comfort
me, it could nt about us
pment banksces elsewher
6) To whatchanging la
ional investoypes is curres. FurthermMarkets andof long term
ndividual invers and othe
ments over a
titutional in. It is uncleional investo
xample, theht may in so
uld thereforrs are beingate sector.
7) How canbe balancedinsurers, re
estion is besng in long te
8) What aredeveloped
wer both que
national devpotentially prces of long
to provide ce programhave the resrequired to
be expectesing these ins to downscre.
t extent andandscape of
ors can playently highly more, as Johnd Long Term
m decision m
vestors mayer institutioa significant
nvestor is thar however ors are fully
e use of proxome instanc
re encouragg fully utilise
n prudentiald in the des
einsurers an
st answerederm assets d
e the barrieat the EU le
estions toget
velopment bplay an impog term infras
partial guarmes to finansources to a
o invest.
d that thesenstruments. cale their pa
d how can inf long-term
y a vital rolesought afte
n Kay observm Decision M
making amon
y have relatinal investortime horizo
erefore welwhether th
y utilising th
xy voting coces reduce t
e the Commed for their p
l objectivessign and imnd pension f
d by insurerdue to the S
ers to creatievel?
ther.
banks have ortant additstructure fin
rantees (akince long-teassess these
e less sophis This could
articipation
nstitutional m financing?
e in providiner by investoved in his reMaking”, insng corporat
ively short ers are typicaon.
l placed to ehis potentialheir influenc
ompanies tothe quality o
mission to copotential to
and the deplementatiofunds, such
s but we areolvency II re
ing pooled
achieved crtive role in snance.
n to those prm investm
e new instru
sticated inve allow the nin such pro
investors p?
ng finance, aors, particuleport to thestitutional intes.
exposure toally exposed
enhance the is being ful
ce in the gov
o exercise voof governan
onsider wheo drive long
esire to suppon of the reas IORPs?
e aware of tegime.
investment
redibility in supporting
provided byent, smallerments could
estors woulnational andgrammes a
play a great
and infrastrarly pension
e UK Governnvestors are
a specific cd to the sam
e quality of lly realised, vernance of
oting rights nce.
ether existinterm thinki
port long-teespective pr
the barriers
t vehicles? C
the minds oinitiatives fo
EIB) or act r investors wd obtain the
d become md multinationd allocate
er role in th
ucture invesn funds and
nment on the also a pote
company, asme core of
long term dor whether
f companies
and other
ng long termng in the Eu
erm financirudential ru
they face in
Could platfo
of or
as who e
more nal their
he
stment d
e “UK ential
sset
decision
s.
m uropean
ng best ules for
n
orms be
Some pset out redemp
It is cleabranch there msome wmechan A live ex2011 byfollowin BGF injeturnovesitting oinvestedBarclays
Existingof finanand invewelcomcomplia Such cecompet
The Conreform Significintroduinstrumimpact impact Some o
ooled invesproduct reg
ption limits,
9) What otof banks an
ar that banknetwork an
may be an enway. We undnism of distr
xample of ty 5 banks - Bng the need
ects betweeer of betweeon the boardd in 27 busis Corporate
g innovationnce for smalestor protec
me a confirmance costs.
ertainty maytition and in
10) Are thethe level anthey? How
nsultation hin EU and thant reformsced and cou
ments. One oof the varyiof regulatio
bservations
Prudential b(PD) and LoRWAs are aincrease at
tment vehicgulation thaare easily u
her optionsnd institutio
ks offer a unnd existing cnhanced rolederstand noribution.
he above is Barclays, Llofrom filling
en £2m and en £5m and d developinnesses so fa
e Banking.
ns, such as pler companctions surro
med, long ter
y also encounnovation in
ere any cumnd cyclicalitcould any i
highlights thhe drive to es to the capuld have sigof our key coing proposaon on the fin
s:
banking regoss Given Dealso greater a point that
cles alreadyat can add reunderstood b
s and instruonal investo
nique distribclient relatioe for banks
on-bank fina
the £2.5bnoyds Bankin
g in the “equ
£10m grow£100m, tak
ng a meaninar and over
peer-to-peeries. There i
ounding therm regulato
urage largern these mark
mulative impty of aggregmpact be b
he potential encourage lital and liqunificant imponcerns is t
als, by whichnancial indu
gulation tenefault (LGDfor longer-t capital bas
y exist, and teal value anby investors
ments coulors to chann
bution mechonships. As to offer acc
ance to refer
Business Grng Group, Ruity gap” ide
wth capital iking a minogful partner150 investm
r networks ois however ase markets.
ory treatmen
r distributorkets.
pacts of curgate long-tebest address
tension betong term in
uidity requirplications fohat regulatoh they wouldustry as a wh
ds to be rat) typically indated instruses are unde
the key to thnd whose rus and provid
d be considnel long-ter
hanism for finnovation
cess to equitr to the sou
rowth FundBS, HSBC anentified by t
n private burity equity srship with b
ment opport
offer a greaa deal of un We believent to deliver
rs to offer si
rrent and plerm investmsed?
tween the pnvestment brements for or the incenors have notd be tasked hole.
ther pro-cycncrease as wuments. Coer pressure
he success oles, such as
ders.
dered to enhrm finance?
finance, botin non-ban
ty or equityrce of finan
d (BGF) whicnd Standardthe 2010 Ro
usinesses tystake (minimbusinesses. Ttunities wer
at deal of pocertainty abe that theser long term
imilar servic
lanned prudment and ho
pursuit of finby the finan
banks havetives to invet undertakewith assess
clical as Prowe move intonsequently
from credit
of a proposadiversificat
hance the c
h through tnk finance dey-like financnce rather th
ch was set ud Chartered owlands Rep
pically withmum 10%) The Fund hare referred f
otential as sobout the rege providers w
certainty ab
ces, deepeni
dential refoow significa
nancial regucial sector.
e already beest in less liq
en a cumulasing the com
bability of Dto a downtuRWAs coul
t losses. Thi
al is to tion or
apacity
the evelops, e in
han the
up in -
ports.
a and as from
ources gulatory would bout
ing
orms on ant are
ulatory
en quid tive
mbined
Default urn. d is is
Some o
pro-cyclicapoint-in-timmay mitigathese buffeA further counder IFRS9cyclical thaWhen accotransfer outbusiness acaccountingCT1 for theThe EU has weightings charges forhowever, isand nationacapital requrevisions toregulatory the potentipreference securities isBasel regulaled banks wfrom long-trefinancing
f these imp
Regulators sectors of tUK’s FundinEBA could ucorporate pconservativThe EC couto the securexperience underlying Prime CollaUse the obsthat these ncalibrated dAllow the Bfurther reguTrading Bodated trade
l though come (PIT) meate against trs and/or reoncern in th9. This is exn the 1 yearunting EL>rt of CT1 to T
ctivity. Press standard co
e UK bankingprovided sofor SME len
r corporatesolated examal regulatoruirements foo the Basel srelief for secal to be reaexpressed b
s critical. ations have
who have beterm lendin
g.
acts could b
could provihe economy
ng for Lendiundertake aportfolios wve calibratiold add its voritisation fraof US sub-passet types
ateralised Seservation penew requiredo not hesitBasel 2, 2.5 aulatory chanok). It is inc
es whilst the
uld be mitigeasures. Thethis though egulatory rehis area is thxpected to br regulatoryregulatory ET2, a lower s comment ould result g industry aome relief fonding and exs undertakinmples. The s applying bor corporatesecuritisatiocuritising lod across to by many inv
put a presseen historicag and favou
be addresse
ide relief vs.y (in a similing scheme)a peer review
with a view toon is appliedoice to the ramework. Tprime and th. Conseque
ecurities (PCeriods for thements are atate to seek and 3 changnge (e.g. strcreasingly dere is such a
gated by use potential it is unclear
esistance tohe proposedbe based ony EL (let alonEL the exces
quality formhas suggestin a multi-b
alone. or SME lendxemptions f
ng hedging ageneral trenbuffers and e loans held
on frameworoan exposurmarket mak
vestors the r
sure on retual lenders tour mini-perm
d in the foll
. capital bufar manner t). w of credit mo ensuring a
d throughourejection of The amendmhere is no in
ently sociallyCS) ABS of She Basel III liappropriateamendmen
ges to bed dructural sepdifficult to pa high degre
ing throughrelease of cr as to mark the buffers
d move to exn a 1 year PITne the lifetimss “provisionm of capitalted that the
billion pound
ding in CRD4from mandaactivity usinnd of ever-hfloors to ris
d on balancerk threaten res, investinking these prole of bank
rns on Risk o infrastructm structures
owing ways
ffers for longto the FSA’s
models appan appropri
ut the singlethe propos
ments appentention to y responsiblSME loans) wquidity andly calibrated
nts prior to tdown properparation, Funlan for the f
ee of regulat
h-the-cycle ounter-cycl
ket perceptios being releaxpected lossT EL and come EL for imn miss” wou which is les
e implementd requireme
4/CRR withatory clearinng derivativhigher capitsk models ree sheet. Thethe ability og in securiti
positions. Gks as market
Weighted Ature projects designed t
s:
g term finans relief for le
lied to SME ate though
e market. ed Basel Coar to be caldifferentiatle securitisawould be pe leverage chd. If they aptheir full imrly before imndamental Rfuture or cotory uncerta
(TTC) rathelical capital on of the reased. s (EL) provi
ould be morempaired assuld result in ss able to sutation of thent for addit
h reduced risng and CVAes. These a
tal requiremesults in hige proposed of banks to isation and
Given the liqt makers for
Assets, whicts to move ato incentivis
ncing to releending unde
and other not over-
mmittee revibrated frome between
ations (incluenalised. hanges to enppear to be plementatiomplementinReview of th
ommit to lonainty.
er than buffers
elease of
sioning e pro-ets). a
upport is tional
sk A capital are,
ments gher
gain have uidity r
ch has away se early
evant er the
visions m the
uding
nsure mis-
on. ng he ng
11) Euro
12) the flowecoprot
We cho While benvironcreateddriven: market Equally,overrelicompan(or nonprofile, withoutare incethan wiwas raisRock in Equity fhas righeffectivcommudevelop There isseek an beyondshould bdeveloptheir hoThrivingprovidinearly stainvestm UncertaThis is aan invesdemand
How couldope?
How can caway marke
w to long-tenomically-,tection for
ose to answ
banks have tnment has red by the grow
successful iappetite ca
, there is a liance on debnies. Equity -existent) eand suits th
t requiring aentivised to thdraw theised in equity2008 to the
finance alsohtly champioely for SME
unity - will hpment, thus
s a ladder of exit at the to realise tbe able to s
ps. This is suolding at an g equity mang certaintyage investm
ment and com
ainty over exalso known stor has oveds a higher r
d capital ma
apital market-based interm investm, socially- aninvestors an
wer these qu
traditionallyestricted thewing demanssuances al
an be demon
onger term bt finance, winvestment
earnings, offhe needs of a revenue st“follow their support. Fy finance one end of 20
represents oned. If the
Es, earlier stahave a dimin
stifling EU e
f equity finaventure capheir own remoothly tra
upported byappropriate
arkets towary to earlier s
ment therefompanies up
xit options ias the “liqu
er his abilityrate of retu
rket financ
kets help filltermediatioments, bettend environmnd consume
estions toge
y provided loeir ability tond for long-low compannstrated by
structural iwith poor at is structurefering the pothe investeetream to pair money” aFor examplen the Londo10).
the type ofcapital mar
age investornished appeteconomic g
ancing for Spital stage aturns. To en
ansition fromy the confidee stage and rds the top ostage investore requires the ladder.
is incorporaidity risk pr
y to trade inrn therefore
ing of long-
l the equity n operates
er support tmentally-suers?
ether.
ong-term fio do so and -term financnies to raisean increase
imbalance inccess to equed to absorbotential for e company, y interest. It
and supporte, during theon Stock Exc
f “patient carkets at the rs - includintite to inves
growth.
SMEs. Seed and will thennsure an effm one sourcence of eachreinvest in
of the funditors of attras building vi.
ated in the premium”: th and out of e increasing
-term inves
gap in Euroto ensure the financin
ustainable g
nancing, thecapital mar
ce. Capital me debt at chee number of
n the form ouity financeb the uncertcapital growallowing up
t is countert companiese financial cchange alon
apital” whictop of the f
ng business st in SMEs a
capital inven look to liqficient fundice of financh level of invthe next ge
ing ladder active exit opbrant growt
price an invehe less liquid
the investmg a company
stment be im
ope? What shat the finag of long-te
growth and
e post-crisisrkets will hamarkets are eaper levelsf issuances.
of long-terme, especially tainty assocwth to compfront capit-cyclical an
s during a docrisis periodne (from the
h the CBI (afinancing changels and t an earlier
estors and buid growth ing environme to the nexvestor on th
eneration ofare thereforepportunitiesth markets t
estor pays fod an asset, thment – as a ry’s cost of c
mproved in
should chanancing can berm investmensuring ad
s regulatoryave to fill the
momentums; and strong
m finance, wfor smaller
ciated with vpensate for
tal investmed equity finownturn rat
d, over £200e run on Nor
amongst othhain do not the venturestage in the
usiness angmarkets an
ment, compxt as their bheir ability tf entreprenee critical to s. Encouragto “pull”
for a stock ahe less assuresult the inapital.
nge in better ment in dequate
y e gap
m g
with an
volatile r the risk ent anciers ther
0 billion rthern
hers) operate
e capital eir
gels will nd panies usiness
to sell eurs.
ing
at issue. rance
nvestor
Regulatcost of is requirexperieprotectbenefit. Finally, financeoptionsperiod, (and theany refifinancin
Barclaysprovidemay prolegislatiinvestorenvisag It is impexamplecapital r
We suphad bee We appthe rece
These mstill to i We belimarket
tory barrierscapital for Sred. It is clence investoions and co.
Governmend. In UK Pub
s could be fowith bank derefore attrnancing ris
ng model.
13) What acovered bo
s would supe clear standove difficultion, but at trs focus suced.
portant thoue, where corequiremen
14) How coright balantransforma
port effortsen a critical
plaud the woent credit cr
Over-relianAbsence of Poor disclosPoor alignm
measures hamplement s
eve that a gand hence w
s reducing iSMEs and shar that belor flight. Thentrols witho
nts’ decisionblic Private or the banksdebt being tracting institk, therefore
are the prosonds? What
pport movesdards acrosst to achieve the very leasch as asset e
ugh to highvered bond
nt as the ass
ould the secce between
ation by the
s to “reshaptool in facil
ork undertarisis:
nce on creditf investor dusure of the t
ment of orig
ave been in psimilar refor
global markewould sugg
ssuer and inhould be carow a certainerefore the out introduc
ns may also Partnerships to providethen refinantutional inv
e making it m
s and cons oelements c
s towards a s the EU comdue to the
st minimumeligibility or
light the rels feature noets stay on
curitisation n financial se financial sy
e” securitisaitating cost
ken by the E
t ratings; ue diligencetrade econo
ginator and
place for sorms.
et for high qgest that the
nvestor accerefully cons level of invpolicy goal cing unnece
have an impps (PPP) for
short-termnced in the cvestors’ monmore difficu
of developinould compo
harmonisedmmunity forinterdepend
m requiremeasset pool m
levant limitao reduction the balance
market in tstability andystem?
ation transat-effective c
EU in CRD 2
; omics; andinvestor int
ome time no
quality ABS e EU compar
ess to the caidered. In th
vestor proteshould be t
essary regul
pact on the instance, w
m financing tcapital markney), the Goult for the p
ng a more hose this fram
d covered br investors. dence betwnts in somemonitoring
ations of coto risks-we
e sheet.
the EU be red the need t
actions to unredit global
2 to eliminat
terest.
ow yet other
will be deere similar se
apital markehis way a dection, capitato deliver a flatory costs
way infrasthilst one of to fund the kets once th
overnment hrivate secto
harmonised mework?
ond framewThe Commeen many d
e of the key requiremen
vered bondighted asset
evived in orto improve m
nlock sourclly.
te the probl
r significant
per than a pecuritisation
ets increaseegree of senal markets full set of at no incre
tructure deaf the financinconstructio
he asset is bhas ruled ouor to accept
framework
work which mission notesdifferent pieareas on wh
nts could be
s versus ABts (RWAs) o
rder to achiematurity
es of financ
ems identif
t jurisdiction
purely region regimes w
e the nsitivity
mental
als are ng
on uilt
ut taking this
k for
would s that it ces of hich e
BS for or lower
eve the
ce as it
fied in
ns are
onal with a
view to the Prim Securitisecuritisthe Basebe calibthe securecent Qsecuritis Whilst tany incr2.5/CRDto avoidtrading the signin a disithe asse We woucommitreflect tsecuritis
Savingsaccountwide mo We wouretail in
The twoquestioexpensecase wecorporadeducti– is likesectors. We beliwish to terms, a
mutual recme Collatera
isation shousation the sel proposed
brated on USuritisation mQIS showedsation asset
the proposareased charD3 harmonid regulatorybook regim
nificantly incincentive foets less attra
uld encouratment to resthe differingsation regu
15) What aavailable w
s accounts at cultural prodel would
uld howevernvestors in a
16) What tydistortions
o possibilitien are eithere; or (ii) thee would expate income ton in respecly to be a le.
eve that carpursue the
a bank’s bor
ognition of alised Secur
uld not all besame. As wed changes toS sub-primemarket in th approximats and the lo
als and QIS hrges in the bised the risky arbitrage.
me appears ccreased capr market mactive for no
ge the EC tostarting theg experiencelation that h
are the meriwithin the EU
are designedreferences, ttherefore n
r welcome maccessing lon
ype of CIT rbetween de
es which arer that there creation ofect any chatax to maintct of equityss distortive
reful considfirst approa
rrowings fun
(inter alia) rities (PCS) q
e treated ase highlightedo the securite and take nhe EU or of tately a 4-5x oss of regula
have focussebanking book weights fo Re-introducounter-intu
pital chargesaking in thion-bank inv
o voice its o securitisaties in the EUhave already
its of the vaU level? Cou
d to reflect ttaxation and
not be welco
member stang term hig
reforms couebt and equ
e normally pcould be (i)
f some sort ange to be atain a consi
y, with a come change fo
deration shoach (i.e. a rend its lendin
originator rquality labe
s the same, ad in our resptisation fram
no account othe loss expeincrease in atory relief
ed on the baok will be refor securitisatucing a signiuitive. If thes and oneros asset class
vestors.
opposition toion market
U market andy been unde
arious modeuld an EU m
the specific d consumer
ome.
tes emphasgh growth o
uld improveuity?
put forward) a reductionof deemed ccompaniedstent level o
mpensating r the bankin
ould be giveneduction in tng, and that
retention rel is an impo
and regulatponse to Q1mework wasof the signiferience of Ethe level of on most sec
anking bookflected in thtion betweeificantly diffe changes aus nature os. This wou
o the Basel in an approd benefit froertaken.
els for a speodel be des
needs of ear regulation
sising savingpportunitie
e investmen
d by academn in the tax deduction id by an offsof tax receipincrease in
ng industry,
n to the banthe tax dedt lending pro
equirementsortant initiat
ion should n10 we expres inapproprficant improEU-originatef capital requcuritisation
k there is a he trading ben banking aferent bank
are applied tof the calcula
ld reduce liq
proposals apriate mannom the adva
ecific savingsigned?
ach market, amongst o
gs schemes wes in a risk a
nt condition
mics in respodeduction gn relation to
setting chanpts. Option the corpora, and potent
nking sectoructibility ofoduces taxa
s. We also betive.
not treat allessed conceiate. It appe
ovements med deals. Thuired for trades.
significant rbook. Basel and tradinging book vsto the tradination wouldquidity and
and reflect tner. This shances in
gs account
taking in tother issues.
which facilippropriate w
ns by remov
onse to this given for into equity. In
nge to the ra(ii) – a deemate income ttially for oth
r if policymaf debt). In bable interest
elieve
rn that ears to
made to he
risk that
book s. ng book d result
make
he G20 hould
o An EU
tate way.
ving
terest n either ate of med tax rate her
akers broad t
income consistewere mresultinthe sup Our viewdifferenbe subjeneeds to
Tax inceunderstincentivimportatax inceallowedin casescause th
It is cleainvestmeconomand issuincome tax paid In their found t28 per c
KPMG’scapital fcompanby over [2].
[1] Data fr[2] KPMGcase for t
currently. Tency of treaade non-deg mismatchply of and d
w is that annt method, sect to a wido be given t
17) What cincentives aincentives b
entives for ltood by saveves should rant if saversentive to encd to the saves such as a che saver to
18) Which tused to deaspecific act
ar that the tment and equmy. To use thuance of equ
tax, equitied on compa
2009 studyhat the marcent on deb
s study into for UK businnies by betwr £133 billio
rom 2005, upd, Building a suthe abolition o
The currentatment betweductible forh would creademand for
y change ofshould be ap
de consultatto the comp
consideratioat national be used to e
long-term sers and costremain in plas are to havecourage loner, so that chchange in risneed unant
types of coral with the rtivities?
tax system iuity financehe UK as anuity. While oes are taxed ny profits.
y Debt Bias arginal tax rabt [1]. Similar
the effects ness by an a
ween 10 andn and the to
dated from Deustainable recof UK Stamp D
t position is ween the banr banks, whiate a prohiblending in t
f law of thispproached wion. For bu
petitive land
ons should blevel for lonencourage l
saving need t effective toace for the te confidenceng-term savhanges can sk appetite icipated acc
rporate taxrisks of arbi
n the UK ane in particula example, thother asset four times
and Other Date on UK eqr disparities
of Stamp Daverage of bd 13 per cenotal amount
vereux et al. (
covery: RebalaDuty on shares
therefore thnk’s incomeile banks’ inbitive tax cothe econom
s nature, whwith care gisinesses ope
dscape beyo
be taken intng-term savlong-term s
to produceo operate. Tterm of the e in other taing is likely be made wor asset allo
cess to their
x incentives itrage when
nd in other Ear, with meahe tax envirclasses suchat purchase
Distortions: Cquity investm are found a
uty found tbetween 7.5nt. It reducet of UK capi
(2002), availabancing the ecos (2010).
hat the tax de and expennterest incomost which wo
my.
ether followiven the poterating intend the EU.
to account fving? In parsaving in a b
products thTo deliver cinvestment
ax incentiveto benefit if
without losinocation, or cr funds.
are beneficn exemption
EU countriesasurably deronment is ah as bonds ae, dividend,
Crisis-Relatement is 20 pacross the E
hat the tax and 9.0 pers the total vtal investme
ble at www.ifsonomy from de
deductibilitditure. If intme remainsould have a
wing option tential signifernationally,
for setting trticular, howbalanced wa
hat are capacertainty fort. Such stabes for long tef some elem
ng the appliccertain life e
cial? What mns/incentive
s dis-incenttrimental im
a disincentivand cash aresale, as wel
ed Issues in Tper cent, coEU.
raises the cr cent, and fvalue of UK ent by up to
s.org. ebt to equity –
ty of interestterest paym
s taxable, thdirect impa
(i), (ii), or aficance, and, considerat
the right w should taxay?
able of beinr savers, anybility is also erm saving.
ment of flexicable tax incevents whic
measures coes are grant
ivises long-tmplications ve for investe only subjel as the corp
Tax Policy, tmpared to m
ost of equitfor technololisted compo £7.5 billion
– a revenue ne
t gives ments
e act on
a d should tion also
x
g easily y tax
Any ibility is centive h might
ould be ted for
term for the tment ect to poration
the IMF minus
ty ogy
panies n a year
eutral
The IMFto have the foreas desirdebt”[3]. In their Governmincentivthe cost
Clearly, are the econominvestmEuropeacycle.
We conborder Subsidiamuch tameasur
The Conbonds. paymenliquidatgeneralhigher rby a higthey car If investpaymencharactto the a
[3] IMF, D[4] CBI, Fu
F goes furth contribute
efront durinrable even .
2011 Futurment must ves for corpts of equity
it would bepricing assu
my. Howevement as a me
an business
19) Would investment
sider that thinvestment ary Directivax law is spees are prefe
20) To whahas led to scompensat
nsultation cThis is to b
nt, since eqution, and thely paid at thrisk that equgher return. rry a fixed (
tors have chnt comparedteristics of thaccounting r
Debt Bias and uture Champio
her, arguingd to excessi
ng the crisisby those w
re Champion“ensure thaorate ventuinvestment
e important umptions wer, it should echanism foes to much
deeper tax t?
his will depewithin the E
ve, the Mergecific to inderable in som
at extent doshort-termite for such e
cites researce expected
uity is more erefore carrhe discretionuity holdersHowever, dincluding ze
hosen to redd to debt, thhe differentrequired for
Other Distortioons (2011).
g that corpoive leveragin. It argues t
who would w
ns report, that any equityuring, and ents tax deduc
to deal withwhich the tax
be a public or both addr
needed non
coordinatio
end on the nEU has been
gers Directivividual memme cases
o you considsm in inveseffects coul
ch that highwith respecjunior to de
ries greater n of the coms therefore fdebt instrumero) rate of
duce their eqhis is primart instrumentr such invest
ons: Crisis-Re
orate level tang and othethat “movemwish to go
he Confedery investmenntrepreneurctible on a p
h these imbx code has cpolicy goal
ressing econn-bank finan
on in the EU
nature of thn supportedve, and the Imber states,
der that thetor behaviod be sugges
lights equityct to the volebt in the rerisk of non-
mpany wherface comparments can df interest, es
quities exporily an invests match invtments.
elated Issues i
ax biases faer financial ment towarfurther and
ration of Brints are attrars’ relief, as
par with deb
balances witcreated in th to enhancenomic cyclicncing altern
U support th
he measure d by measurInterest and which may
e use of fair our? What asted?
y valuationsatility whichepayment h-payment. Areas debt is red to bondemonstratepecially if th
osure due tostment decisvestors’ obj
in Tax Policy (
avouring debmarket pro
rds neutralitd tilt the p
tish Industractive by loowell as the
bt investmen
th care, givehe structuree the tax effcality and fanatives acro
he financing
that is propres such as td Royalties Dy indicate th
value accoalternatives
s can be moh relates to
hierarchy in Also equity h
contractuad holders is ce volatile valhey are long
o equities’ gsion based oectives rath
(2010)
bt finance ablems that
ty would … laying field
ry argues thoking at the scope for mnts”[4].
en how embe of the ficiency of eacilitating acss the econo
g of long-te
posed. Crossthe Parent-Directive. Hhat national
unting prin or other w
ore volatile tthe risk of nthe event oholders’ retul in nature. compensateuations too
g dated.
greater risk oon how well
her than a re
are likely came to be seen against
at the tax
making
edded
quity ccess by omic
erm
s-
However,
nciples ways to
than non-
of urns are The
ed for o where
of non-l the esponse
It is woraccepteprivate investmrise to pstandarprioritisinvestminputs. An oftecost lesperformManagetheir invof invesprovisiomanage IAS 39 iterm deit requiroutside is recogdirectlyreleased IFRS 9 FEurope fundamreflect iand prorequirespermittheld in from thwith gaterms wrisk. We conprovidecertainlexplainishort-terequired
rth noting ted valuationequity inves
ments and fopractical difrds prescribeses observab
ments are mo
n suggesteds impairme
mance of theement can svestment ststments andon of fair vaement to ac
is the accouebt and equres them to profit and l
gnised in proy in profit and on disposa
Financial insin either 20
mental measts business
ovides invests fair value ted to be heorder to ear
his expectedins and loss
which enable
sider that thes appropriay have the aing their buermism, we d or permitt
21) What kengagemen
hat for mann techniquesstments and
or which thefficulties in ae a hierarchble informatost subjectiv
d alternativent. Howevere company supplement trategy, the d correspondlue informa
ccount over
unting standity holdingsbe carried
loss within aofit and lossnd loss otheal or maturi
struments, w016 or 2017urement prmodel. Fairtors with thmeasuremeld at cost – rn an intere
d performanses being ince financial in
he accountiate and deciability to avsiness modedo not belieted by IFRS.
kind of incennt?
ny equities ts, can be a jud other equere is no comarriving at ahy of valuatition. In addve and the s
e accountinr, this is likein selectingthe performnature of thding incenti
ation over tithe actual p
dard which cs. Generally,on balance a separate cs. If the inverwise any reity of the ins
which is inte7 once endorinciples of Ir value is verhe most tranent for equita non-volat
est based retnce will resucluded in prnstitutions t
ing currentlsion useful
void recordinel, short tereve it has or.
ntives could
the calculatiudgmental ities which
mparative ma reliable faion inputs u
dition disclosensitivity o
g treatmentely to provid investment
mance statehe investmeives to makme will provperformanc
currently ap, except for sheet at fai
component estment becesidual fair vstrument.
ended to reprsed by the FRS 9, that ry often thensparent andty investmetile measureturn and nolt in the entrofit or loss.to share in t
y required uinformationng volatility
rm performar will be cau
d help prom
ion of fair vaexercise. Thare either u
market inforir value. How
used to calcuosure requirof the valuat
t to fair valude less usefuts and mana
ements withents; the lone long termvide investoe of the inv
pplies to listthose whichr value withof equity. I
comes impaivalue chang
place IAS 39European Uan entity’s
e appropriatd decision-unts. Long-te – provided
ot for sellingtire investm Such deviathe returns
under IAS 3n in the finay in short-teance and loused by the
mote better
alue, whilst his is particuunquoted, earmation avawever, the aulate fair vaements identions to cha
ue is to holdul informatioaging share
h suitable disng term exp
m investmentors an oppoestments.
ted Europeah are held fo
h gains and nterest andired the lossge deferred
9, is expecteUnion. We areported pete measure fuseful informterm debt ind the debt isg. Relatively
ent being hations couldfrom a proj
9 and in futancial statemerm profitabng-term straccounting
long-term
based on gularly the caarly stage ilable. This
accounting lue which ntify which nging one o
d assets at con on the holders’ funsclosures reected perfot decisions. rtunity to h
n companieor trading plosses recor
d dividend ins is recognisto equity is
ed to be effeagree with therformance for financiamation. IFRnvestment iss plain vanilminor devia
held at fair vd include vaject, or redu
ture by IFRSments and ebility, as welrategy. If the treatments
shareholde
enerally ase for
gives
or more
cost, or
nds. egarding ormance
The old
es long purposes rded ncome sed s
ective in he should l assets RS 9 s also la and ations
value rious
uce its
S 9 entities ll as ere is s
er
The keyand shatheir pla The Conwould nsharehovalue. W
22) supp
There isvaluableand soc It is certHoweveliquiditythey wo
y to effectiveareholders. Sans.
nsultation snot support older is an imWe see the f
Discriminatwithin a mifree float leIf a sharehoassume thashareholdincompany. Tequity. Smaller comtend, in genloss of votindisproportiresponsibiliwould affecIn infrastruprojects mafunders typconstructiostrong interability to seAffecting dseem approLastly, recegreater tranof the sharedifficulties shareholdersignificant.
How can thport long-t
s a commone than short
cial benefits.
tainly true ter, there is ay, which is vould be able
e shareholdShareholder
uggests incincentives t
mportant prfollowing m
tion on this nority of sh
evels olding loses at this loss ong, creating This expecte
mpanies, sucneral, to havng rights foonate impaities. It wouct smaller bucture projecay be financpically rely oon. All sharerest in ensuell their inveifferent vot
opriate. nt developmnsparency aeholding strin accurate r confusion
he mandateterm investm
n assumptiot term ones.
that long teran equally imvital for price to exit an i
der engagemrs have diffe
reased votinto promote rinciple and
main problem
basis appeahareholders,
some or allof strategic i further illiqed loss may
ch as those ve smaller frr each part
act on the abld also meausinesses dicts, most risced on a nonon shareholdeholders, whring the pro
estment at aing rights b
ments in corand commuructure coulidentificatioas to their e
es and incenment strate
on that long , driving hig
rm investormportant roce certainty nvestment
ment lies in cerent invest
ng rights orone tier of
d would encoms:
ars to be un especially i
of its votinnfluence wo
quidity and be reflected
on AIM andree float levof that free
bility of sharn that the eisproportionsks lie durinn- or limitedders to helphether shortoject is coman attractivebased on sha
rporate govnications wld be detrimon of entitleentitlement
ntives givenegies and re
term investgher long te
rs have an imole played byand for longif needed.
communicament strate
r dividends tshareholdeourage pub
democraticin the case o
g rights on ould reducea reductiond in the prim
d ICAP Secuvels than com float will threholders to
economic imnately. g the const
d-recourse bp manage isst- or long-te
mplete (as the price or geareholder pr
vernance prawith sharehomental to thements whets, though n
n to asset mlationships
tment strateerm returns
mportant roy short termg-term inve
ation betweeegies to suit
to long termr over the olic policy to
c as may conof companie
sale, it is ree the value o in the over
mary marke
urities & Dermpanies in therefore havo exercise th
mpact on the
ruction perbasis, it is fasues that merm orientathis will driveenerate longrofiles there
actice have lders, and ais approach
en shares arnot insurmo
anagers be ?
egies are inas well as b
ole to play inm shareholdestors to hav
en managemtheir needs
m investors. other, as equo recognise t
ncentrate coes who have
asonable toof that rall value of et for a com
rivatives Excthe FTSE10ve a heir ownerse cost of cap
iod. Whilst tair to say thaay arise durted will hav respectivelg-term retuefore would
encouragedany fragmenh. The practie acquired auntable, are
developed
herently mobroader gove
n the markeders in drivinve confiden
ment s and
We uality of this
ontrol e low
o
the pany’s
change, 0. The
hip pital
these at ring ve a
y their rns). not
d ntation ical and e
to
ore ernance
et. ng ce that
From thexperiecompandate. Anat issuean invesdemand A vibranboth sufund rai As has bright mwhich aof the oincreaseaverageregisteronce evmarket. Barclaysinvestorterm fogovernathat therights D
As the Cand Lonfiduciarstakeho
One recconceptpublish conceptand wai
he perspectinced when ny is influenny uncertain - the “liquistor has oveds a higher r
nt market wpporting inising.
been noted etric to des
a portion of overall equite in the amoe holding pers shows thavery two yea.
s, thereforer engagemecus. The Coance concere CommissioDirective).
23) Is thereterm financ
Commissionng Term Dery duties weolders felt:
It was not cthose dutieTheir fiduciprecluding performancTheir obligarequired no
commendatt of fiduciara final repo
t of fiduciarit with inter
ive of manyraising mon
nced by hownty over exidity risk pre
er his abilityrate of retu
with both lonvestors in m
by the Londcribe investthe share b
ty. In other wount of shareriod. As an at, in 2011, ars, which d
, believes thent model isonsultation mrns about thon is looking
e a need to cing?
n will be awacision Maki
ere interpret
clear who ins were; iary duties rconsiderati
ce; and ations wereo more than
tion of the Kry duty as aport in June 2ry duty to clrest for the L
y issuers of eney in the p
w certain theit options isemium”. Ty to trade inrn therefore
ng-term andmanaging th
don Stock Etor time horbase is tradewords, the ires being traexample, L83 per cent
does not ind
hat it is mors effective, amay wish tohe increasedg at this are
revisit the d
are the Kay ng”. The repted in the co
the investm
required theon of long-t
entirely den a duty of c
Kay review wpplied to inv014. We seearify the kinLaw Commi
equity, liquidrimary marey are of the factored inherefore, th and out of e increasing
d short-termheir risk, and
Exchange anrizons, becaed, rather thncreasing saded accordondon Stoc
t of investoricate signifi
re appropriaand not seeko consider ind use of ageea in the con
definition o
review wasport highligontext of inv
ment chain w
em to maximterm factor
fined and licare.
was for the Lvestment. Te that therend of fiduciaission’s revi
dity risk is tket. Investoeir ability to
n to the priche less liquid
the investmg the compa
m investors d for busine
nd others, shuse it reflec
han the size peed of HFTding those sck Exchangers turned thecant loss of
ate to considk to focus inn more detancies and pntext of the
of fiduciary d
s published ighted a numvestment. I
was subject
mise returnss which mig
mited to the
Law CommiThe Law Come could be bary treatmeew.
the most sigor willingneo sell that ine an investod an asset, t
ment – as a rany’s cost of
is thereforeesses in achi
hareholder tcts the increof that portT strategiesstrategies, he analysis ofeir portfoliof long term
der whetherntroduce incail whether troxy advisorevision of
duty in the
in the UK – mber concerIn particular
t to fiduciary
s over a shoght impact o
eir contract
ission to revmmission is enefit in rev
ent expected
gnificant cosss to suppovestment at
or pays for athe less assuresult the inf capital.
e at the heaeving low c
turnover is eased speed tion as a pro, rather tha
has resulted f company so over less thinvestors fro
r the currencentives for there are
ors (we are athe shareho
context of
“UK Equity rns about hor some
y duties and
ort-term scaon company
tual obligati
view the legexpected to
viewing the d of asset m
st rt a t a later a stock urance nvestor
rt of cost
not the with
oportion n an in a low
share han om the
nt short-
aware olders’
long-
Markets ow
d what
ale, y
ons or
gal o legal
managers
Transpabetweeneffort inintegratof corpofinanciasuccessboth fin We are duplicatlong terrequirem We conpublisherequiremapply tocompreentity isframewtranspa The UK choice orelevantappropr We obscompanactual rquarterthereforeportin
The keygeneral
24) To whainformationand contrib
arency of inn shareholdn to ensurinted reportinorate discloal key perfor, and as suc
nancial and
in favour oftion, and werm goals. Wments.
sider that aed, for the dments for a o companieehensive ands delivering
work in termarency) of fin
guidance mof such indit to understriate and th
erve that thnies (especiarequirementrly informatre that quarng.
25) Is there
y benchmarly well estab
Return on erepresentatCost incomCore Tier 1 Net Tangib
at extent can help provbute to bett
formation pders and theg that the in
ng has an imosure, and wrmance ind
ch, Barclays non-financi
f integratedelcome its p
We believe th
a robust framdisclosure oBusiness Re
s that are Ud include a won its longe
ms of cost benancial repo
mandates thcators to mtanding the
hat such met
he overall treally those wts. Many UKion that is brterly report
e a need to
ks which coblished. For
equity, prefetive trend ove ratio, alsoratio, unde
le asset valu
an increasedvide a cleareter investme
provided to e companiesnformation
mportant rolwill be of ben
icators as fuhas commit
ial measures
d reporting wpotential rolhat it can be
mework alreof non-finaneview. This S registrantwealth of iner term goaenefit and alorts.
e disclosuremanagement
companiestrics should
end is towawith a US listK companiesbecoming fating will be
develop spe
ompanies prr example w
erably adjusver time of
o adjusted aer Basel 2.5 aue
d integratioer overviewent decision
investors iss in which thit discloses
le to play innefit to a ranundamentaltted to pubs.
where this sle in integra
e achieved w
eady exists, cial informacombined wts, result in
nformation als. The EU slso adding t
e of key perft, to enable t’ strategy an
d not be man
rds, not awating) which s with no suar more coma permanen
ecific long-t
rovide and iwith regard t
sted to remobusiness pes described and pro form
n of financiw of a compa
n-making?
s at the hearhey invest, a is clear, tim
n improving nge of stake to measurilishing an a
serves to fosating the strwithout crea
and furtheration in the with the SECmanagemenabout stratehould consi
to the overa
formance inthem to selend performndated.
ay from, quis driven bych requirem
mprehensivent feature o
term bench
nvestors moto banks the
ove one-offerformance
above ma calculat
ial and non-any’s long-t
rt of an effeand Barclays
mely and accthe quality
eholders. Wing a compannual balan
ster transparategy of buating any ad
r requiremeUK in the fo
C requirement reports tegic objectivider any addll length (an
ndicators, bect indicatoance. We be
arterly repoy investor dement provide. It is certaiof European
hmarks?
onitor vary ey include:
f items and t
tion under B
-financial term perfor
ctive relatios puts signifcurate. We band comple
We view non-any’s long-tnced scoreca
arency and rusinesses witdditional leg
nts will sooorm of the ents that alrhat are ves and howditions to thnd hence
ut leaves thors that are elieve that t
orting for laemand more investors nly possiblecorporate
by industry
thereby pre
Basel 3
rmance,
onship ficant believe eteness -term ard of
reduce th their
gal
n be
ready
w the his
he most this is
rger e than with
e
but are
esent a
As highscorecafor bencinformaeconomratio anthat ma These adate, orbenchmconsideperformcan prolonger tspecificbenchm
We cho The ComBarclaysbusines We havbusinessuppleminvestm As the mfamiliareconomthat themarketsissuance
hlighted aboard of both fchmarks to ation needs,
mic environmnd capital raandatory be
and other ber a reporting
marks tend ner the value mance trendovide an inditerm perfor
c steps shoumarks.
26) What fureforms, to 27) How coways to useadditional l 28) Would markets? Hsecuritised 29) Would alternative their contin
ose to answ
mmission iss are focuse
sses of all siz
ve significansses. Our poment this ba
ment and cre
market for nrity and criti
mic for invesese minimums for exampe. These m
ove, Barclaysfinancial andevolve over
, which somment has resatios which anchmarks w
enchmarks ag period sucnot to extenof benchma
d over time oication of ho
rmance and ld be taken
urther stepo facilitate S
ould securite securitisatlending/inv
there be mHow and by
products sp
an EU regunon-bank s
nued growt
wer these qu
s right in thied on develozes and sect
t experiencsition as a u
ank lending eative, non-
non-bank finical mass tostors to assem deal sizes
ple), due to tarkets are li
s has also cod non-finanr time and r
metimes chansulted in greare widely r
would not b
are calculatch as a quarnd over longarks to be gor to highligow the busirisk managat this stag
s could be eSME access
tisation insttion in ordevestments t
merit in creawhom coulpecifically d
latory framsource of fith?
estions toge
s Consultatoping a fundtors.
e in lendinguniversal baby developbank fundin
nance growo facilitate aess. Howeves will still bethe professiikely to rem
ommitted toncial measurreflect changnge quicklyeater interereported ande suitably re
ed by refererter, half yeager periods oreatest wheght a risk anness has deement. Wee to develop
envisaged, ito alternati
truments foer to mobiliso SMEs?
ting a fully ld a marketdesigned fo
mework helpnance for S
ether.
ion to look ading environ
g to and supnk means wing access tng streams.
ws and devel reduction ier, it is likelye large (in thonal fees an
main inacces
o publishingres. As suchging market. For banks
est in benchd commentesponsive to
ence to a poar or full yeaof time suchere they are nd how the eveloped ande therefore p additiona
in terms of ive sources
r SMEs be dse financial
separate ant be developor SMEs’ fina
p or hinder tSMEs? What
at improvinnment able
pporting smwe are well pto capital m
ops, there iin the minimy within thehe region ofnd complianssible for ma
g an annual h, we considt conditions
s for examplmarks such
ted upon. Wo investors’
oint in time,ar. Such widh as 2 or 5 yused to ide
risk is beingd provides ado not consl long term
EU regulatiof finance?
designed? W intermedia
nd distinct aped for SMEancing need
the developt reforms co
ng access to to support
all and medplaced to exarkets, new
s the potentmum deal sie traditional f about £20mnce costs asany smaller
balanced der it is impos and investle, the curre as the cost
We are concechanging n
, e.g. balancdely used years. Howeentify or illug managed. an indicatiosider that anperformanc
ion or other?
What are thearies' capita
approach foEs, includingds?
pment of thould help su
non-bank dthe ambitio
dium sized xplore ways
w sources of
tial for greazes in whichcapital mar
m+ in the desociated witmid-sized
ortant tors’ ent t income erned
needs.
ce sheet
ever we strate a This
on of ny ce
r
e best al for
or SME g for
his upport
debt. ons of
to
ater h it is rkets ebt th
corporacap bra Given thcorporaof inter There aissuers market financincompar UK SMEefficientthis servequity f From ouindustrybank ch SME an The 201illustratproductexcluderequiremThe laulower mevidencmarkets Private The privwithoutunderwby strictadvisorsperformteams tmore incould bmarket.placemethat theto use wbenchm
ates in their cket.
hat investorate exposuremediating v
are exampleby allowingeven for sm
ngs are currred with a fe
Es and mid-st and cost evice. We alsfunding ladd
ur own expey and businehallenge by
d Mid-Cap B
10 launch otion of how t, buy introd
ed the vast mments of £5nch of the O
minimum dece that issues.
Placements
vate placemt accessing t
writing proceter credit cos and is bou
mance to theto look at thnstitutions toecome deep. Importantlent market ese could bewhen calculamark accord
own right,
rs will generes, it may bevehicles and
s of bond fu investors to
mall volumesrently challeew years ag
sized busineeffective banso believe thder in absor
erience as aess organisarecognising
Bond Marke
f the Londothe correct
ducing a newmajority of r50K+ - sumsORB presentenominationers may be a
s
ment regimethe capital mess requiresommittee scught by the e issuer. All
he asset claso develop thper and morly the develocould be co
e utilised forating regulaingly:
including th
rally aspire te possible to
d structures
und poolingo access pos of lending
enging giveno.
esses requirnking financhat there is srbing early s
a provider ofations, we b
g the need to
ets
on Stock Excinfrastructu
w pool of caretail invests of capital wted a standa
ns, and has pable to achie
e is a viable amarkets. As greater duecrutiny. Oncinvestor, thof this requs. Improvemhis capabilitre liquid. Thopment of a
onsidered. Wr evaluatingatory capita
hose whose
to develop ao reduce mto pool issu
g in Austria woled risk an. Timing is
n the curren
e a diverse rce. Barclays significant ostage and de
f business fubelieve the Co develop fu
change’s ORure can proapital. The wtors by virtuwhich retail ardised platproved an eeve smaller
alternative fs private plae-diligence ce a deal hae investor n
uires greaterments to thety and therehis improvea standard s
We propose g credit metal, as well as
turnover is
a diversifiedinimum deauers.
which makend allowing
important int very weak
range of funcontinues t
opportunityevelopment
unding and Commissionunding dive
RB retail bonmote liquidwholesale b
ue of minimuinvestors d
tform for theffective prim
scale fundr
for corporatacements ar
to be perfoas been origneeds to conr man-powee structure oefore, the EUes momentuset of measubelow somerics and anaenabling re
in the lowe
d portfolio oal sizes for is
es it viable fissuers to acin this respek appetite fo
nding optioto be commy for enhanct risks.
from our dn should appersity.
nd market pdity and voluond marketum denomio not typicais pool of inmary markeaising than
tes wishing e illiquid secrmed on thinated by thntinue to moer and typicof the markU private plaum and critiures for thee basic paraalysis for insegulators to
er part of th
of mid-sizedssuers with
for investorsccess the boect - structuor structure
ns, as well amitted to delcing the role
iscussions wproach the n
provides a gumes of a ‘nt historicallynation ally have acnvestors witet. There is eon the who
to raise funcurities, thee issuer foll
he companyonitor the
cally dedicatket could enacement macal mass of EU private
ameters. Westitutional in
o evaluate an
e mid-
d the use
s and ond ured ed debt
as ivering
e of the
with non-
ood new’ y
cess to. th far early
olesale
nds e owed
y and its
ted able arket the
e see nvestors nd
1.
2.
3.
“Shavin There ainvestmmore colevel of preventbelieve compan Peer-to Peer-toentreprto peershas bee Althougremovefor micrCommisquality long ter
In this snotablylending
Liquidity: Litself and thrank compainvestment Liquidity tecompany inVolatility: Vwhen assesmetrics, covassess unraearnings orfundamentaparticularlyCredit Metrquality of isand every inbased on thcash flow teuseful start
ng bonds”
are examplement producost effectivedisclosure r
t their develthat these p
nies wishing
-peer
-peer lendinreneurs and s. This mode
en to offer a
gh this meches the risk mro-businessssion and thrisk managerm.
30) In additwhat else c
submission, y responsible from wholl
Liquidity is ahus is integranies using t grade, liquesting transcn isolation raVolatility is sing credit qvenants, bu
ated issuers r share priceal credit un
y for privateric Ratio Anssuers. Thernvestor andhe industry aest based onting point.
s of compancts to retail ie than retailrequiremenlopment intproducts cog to raise sim
ng is a growbusinesses el may reduccess for bo
hanism redumanagement
es and the she peer-to-pement proc
tion to the could contri
Barclays hae risk manaly addressin
an importanral in helpina scale of liqidity must scends indusather than ranother arequality. Volasiness profitypically wi
e movementderwriting p
e companiesnalysis: Ratire are manyd rating agena company n leverage a
nies successinvestors in bonds for tts. However
to a mainstrould developmilar amoun
wing sector. a means of
uce transactorrowers wh
uces the trat skills. It masmallest SMpeer sector cesses to ens
analysis andibute to the
as identifiedgement and
ng the fundi
nt part of deg make a crquidity. In mscore at the tries and threlative to aea of focus fatility can ale to profitall use volatits. This anaprocess ands o analysis s
y ways to evancy will havoperates w
as well as a c
sfully issuingaccessible l
the smallestr, this relativream investmp to becoments.
Organisatiof pooling andtion costs. Hho have bee
ansaction coay be suitab
MEs. Barclaysto work in psure this sec
d potential e long-term
a number od regulatoryng gap expe
etermining aredit qualitymost cases f
higher end hus can be aa peer groupfor both inv
affect all aspability. Manylity measurlysis is used
d can vary d
hould form aluate a com
ve different ithin. In gencash flow co
g non-translots of £1,00t issuers, as ve lack of inment optione a viable ca
ons such as d therefore,
However, to en rejected b
osts associatble as an altes would, howpartnership ctor is able t
measures sfinancing o
of constrainy requiremeerienced by
a company’sy assessmenfor an assess
of the rang good tool t
p or industryvestors and pects of issuy banks anding tools wh
d as a suppleepending o
a foundatiompany’s finaviews on ap
neral, we feeoverage test
sferable and00. These pthey do not
nvestor protn for high stapital-raising
Funding Cir, diversifyindate, its pri
by tradition
ted with banernative funwever, encoto find mea
to perform
set out in thof the Europ
nts to traditients, which py European b
s ability to snt. Rating agsment of
ge of rankingto use for a y average. rating agener from cre
d investors which focus oement to then how data
onal view onancial state
ppropriate rel some formt could serv
d non-converoducts cant attract thetections maytreet saversg option for
rcle offer g credit to binciple advaal funding r
nk lending, nding mechaourage the ans of delivestrongly in
his Green Papean econo
ional bank fprevent tradbusinesses.
sustain gencies
gs.
ncies dit
who on e is used
n credit ments
ratios m of ve as a
ertible n be e same y . We r
be lent antage routes.
it also anism
ering the
aper, my?
finance, ditional
Howeveoffers tocould trmarketsmechanequity aor not. Howevedifficultregulatoby new the Com
er, it should o address noransform ths by providinisms whichand other no
er, it is cleart, and Barclaory structurentrants, or
mmission on
be possibleon-bank soue funding eng an equit
h bring togeon-bank inv
r that the cuays would wres to allow r through exn this point.
e to make usurces of fina
environmentty underpinnther potent
vestment, w
urrent regulwelcome ser
innovative xisting prov
se of the scaance. Barclat for SMEs aning. This mtial investor
whether furt
atory envirorious considnew non-ba
viders. We w
ale and reacays believesand even enmay be thros and growther support
onment woueration of tank finance would welco
ch that the bs that innovhance the t
ough platforth businesseted by tradit
uld make suhe value of platforms,
ome further
banking secation in this
traditional lerms or otheres to facilitational bank
uch innovatideveloping whether opr discussion
ctor s space ending r ate
finance
ion
perated s with