The revised Various Funding Fund Managers Directive (AIFMD) may result in a pan-European passport for lending actions, harmonising non-public credit score throughout the continent.
The up to date model of the EU laws incorporates guidelines for mortgage origination funds for the primary time, that means that non-public credit score fund managers might want to adjust to stricter necessities.
“AIFMD was first conceived as a supervisor regime,” stated Matthew Keogh, funding funds companion at legislation agency Linklaters.
“That is principally the primary time it’s moved into product regulation, impacting how managers elevate non-public credit score funds, the insurance policies and procedures they should have, gearing limits and the selection of whether or not they’re open or closed ended.
“There’s the potential promise of a pan-European passport for precise lending actions. It’s not a harmonised regime throughout the continent, some nations are simpler than others to lend in. As an example, the UK is a straightforward market – except you’re lending to shoppers there’s little oversight from the AIFMD. In different nations, it’s tougher and requires considerably extra structuring and in some it’s close to unimaginable and not using a banking licence.
“The extension concerning mortgage origination gives some risk of harmonisation. Some nations may select to ‘gold plate’ that with additional laws, however it’s a constructive factor.”
Nonetheless, the revised AIFMD may current challenges for EU fund managers which might be lending into the US.
“Considered one of these [complications] is ECI threat – successfully tax leakage for loans popping out of the US,” stated Keogh.
“Sponsors use quite a lot of approaches to mitigate this leakage, certainly one of which entails a major lender holding (or ‘seasoning’) a mortgage for a time period after which promoting the mortgage to a different automobile. Underneath the revised Directive, an EU managed fund won’t be able to undertake the seasoning function.”
The European Parliament voted to replace the AIFMD on 7 February and the textual content of the Directive was then adopted by the European Council later that month, earlier than being revealed within the EU’s official journal. Member states have two years to undertake the foundations in nationwide legal guidelines and funds then have an extra 12 months to fulfill the extra information reporting necessities.
