On April 11, 2016, the ESMA published an Opinion setting out key principles for a European framework on loan origination by funds. The Opinion is in response to the European Commission’s request that ESMA assist in developing points for its forthcoming consultation on an European framework. The potential framework is part of the Commission’s Capital Markets Union Action Plan.
ESMA’s Opinion includes the issues to be considered in the forthcoming consultation, including amongst others: (i) whether authorization of AIFs and/or their managers is necessary, including whether additional requirements to those already established under the Alternative Investment Funds Directive are necessary; (ii) whether the types of funds should be restricted to close-ended vehicles; (iii) whether transitional provisions are necessary should the new framework be more restrictive than the existing provisions in some EU Member States; (iv) the extent to which investment in loan originating funds should be open to retail investors and whether any protections should be applied when retail investors are involved; (v) the requirements on leverage, liquidity, stress testing and reporting; and (vi) whether the origination of loans should be limited to certain borrowers (e.g. excluding consumers) or specific borrowing purposes.
The Opinion does not cover loan origination by Alternative Investment Funds under the European Venture Capital Fund, European Social Entrepreneurs Fund and Long-Term Investment Funds Regulations. It also does not include loan participation or loan restructuring.
The Opinion is available at: https://www.esma.europa.eu/press-news/esma-news/esma-publishes-opinion-euframework-loan-origination-investment-funds.