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

will continueir role will ict and servico benefit fro

spond to spehrough offery continue tonce sheet, ass and existin

s of the busis of econom

Register No

n”) Green Pa

on’s Consult

nd clients rachise we ar

eeds in botht capital from

as possible rkets that neneral, we bepect that grein turn enco

ue to play a inevitably chce requiremom their buecific needsring the full o offer a uns well as tapng relations

iness commmic growth b

Barclays B1 Church

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aper: Long-

tation on Lo

anging frome able to pr

h traditionalm institutio

of the poteeed to be lieve that theater awareourage addit

vital role in hange. Univ

ments of thousiness mods of a contin

range of finique distrib

pping third phips with

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Bank PLC hill Place

London E14 5HP 6359-39

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ential

he eness tional

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ot be g is a

 

If you wAssistan Yours si Cyrus AVice Ch

highly effichowever, sucontributinfinancing eBarclays beto achieve aSMEs: It is wgrowth, andbusinesses tlending to Uincrease agOctober 20lending caninstitutions“distributinspace is conInfrastructubringing altopportuniticapabilitiesrequiremenSecuritisatiSupervisionthreat to ththereby failquality secu

would like tont Vice Pres

incerely,

Ardalan airman, Hea

ient and accupply may bg to economarly stage c

elieves that na funding enwidely recogd should be through resUK househoainst a mar

012 was 5% nnot addresss could play ng” long termnstrained byure financinternative soies that are s are able tonts will requion: Regulatn (BCBS) Sechis market. Rling to diffeuritisation fr

o discuss anysident, Gove

ad of UK an

cessible formbe constrainmic contracompanies, pnon-bank alnvironmentgnised that a significan

sponsible leolds and busrket decline:higher thans the totalita unique ro

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

d EU Public

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

Policy and

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

to play an ato this mar

or bases thaonly to increternative soh in the Bask Consultaticlass all secuts, and inste

ther detail pmund.j.lakin

Governmen

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