It has been a busy few years for the ICMA Financial Institution Issuer Forum (FIIF) and ICMA Corporate Issuer Forum (CIF), with the markets presenting all kinds of challenges: from the effects of existing regulation, to potentially seismic shifts in future practice.

The bedding-down of regulations such as the Market Abuse Regulation (MAR), MiFID II and the Prospectus Regulation has led to some lengthy discussions at the FIIF and the CIF, assessing practical impact on, among other things, new issues processes, investor relations and availability of research. External speakers (such as KPMG), as well as members of the Asset Management and Investors Council (AMIC) and the Primary Market Practices Committee, have been invited to the FIIF and CIF meetings to engage with the issuers and share their perspectives. In January, representatives of the FCA attended the CIF to discuss the impacts of implementation of MAR and MiFID II and associated challenges, which has led to continued, ongoing dialogue between the regulators and the issuers in both the FIIF and the CIF. Communications such as this ensure that the issuer voice is being represented when considering the necessity for, and the effects of, regulatory interventions and helps a comprehensive, rounded industry view to be formed.

The FIIF and the CIF have been engaging with ICMA on FinTech, automation and market electronification. Members of each forum have attended roundtable discussions, with the aim of helping ICMA members identify and anticipate the impact of technological innovation more broadly on capital markets. These roundtables not only facilitate a better understanding of the existing and potential offerings, but also encourage issuers to get involved, with a view to moulding the future direction of FinTech and ensuring that it works for the good of the whole market. From the point of view of the issuers, common connectivity standards to improve the functioning of primary markets, ease of issuance, and practical end-to-end straight through processing are an important focus, which ICMA will continue to explore.

Related to this, relevant conclusions from the recently-established Primary Market Investor Working Group of the AMIC have also been on the agenda of the FIIF and the CIF, further establishing the links between ICMA members across different constituencies. This includes working to develop efficiencies which should speed up and facilitate the investment decision process, such as agreeing a template of initial terms which should be disclosed when a deal is first announced, and minimising delays in ISIN provisions for new deals.

Markets-wise, corporate issuance remains buoyant. However, market tensions and behaviour are changing: corporate sector purchase programmes are being tapered, which steers demand towards more normalised market forces, and environmental, social and governance (ESG) factors are higher up investors’ agendas. Complementary to this shift is the continued upward trajectory in issuance of instruments such as green bonds, social bonds and sustainability bonds, which have joined the mainstream of debt capital markets funding instruments and all of which were explored in some detail at the FIIF and the CIF in 2018.

These developments present opportunities for treasurers to engage a whole new investor base, while continuing to nurture existing relationships. Recent investor presentations to the CIF assuaged potential issuer concerns over suitability of, and access to, the sustainability bond market by highlighting that investors generally apply a more substantive approach in their analysis, which looks beyond the form of the instrument, to the company and its strategy. Added to this is the focus at a regulatory level on making sustainable issuance less problematic for large corporate issuers, all of which should help to encourage, foster and advance scalable, sustainable issuance.

Members of the FIIF and the CIF have been heavily engaged on the work of transitioning away from IBORs towards risk-free rates. It is in all market participants’ interests to ensure a smooth transition with minimum market disruption, so it is important that the issuers become part of the solution by helping to influence the outcome and demonstrate leadership. Members of the FIIF and CIF have spent a significant amount of time discussing potential outcomes, including for new issuances of floating rate bonds as well as for legacy issues, and have provided a lot of expertise to allow a market-led solution to emerge. ICMA is very grateful to all those involved for their clear, pragmatic thinking and the technical inputs, all of which is helping to inform the work of the Sterling Risk-Free Rate Bond Market Sub-Group.

Exciting times are ahead, and it is with a sense of anticipation that we approach 2019 – Brexit is imminent, processes are automating, benchmarks are changing, investor priorities are shifting and financial instruments are evolving. But while plenty of preliminary work has been carried out, a lot remains to be done. ICMA is looking forward to supporting these important issuer groups, as they to continue to shape these and other developments in the capital markets.

Membership of the FIIF is high, with more and more members of the FIIF Treasury Counsel Group also now attending the meetings. The CIF attracted two new members in 2018 – Telefónica and Associated British Ports – and engagement at the respective meetings continues to be excellent.

Contact: Katie Kelly katie.kelly@icmagroup.org