On 23 December 2016, the Bank of Italy finally adopted the regulation (the Regulation) aimed at clearing terms and conditions of direct lending into Italy by EU AIFs1. The Regulation was published in the Italian Official Gazette of 4 January 2017.
The first opening of the Italian law to direct lending by AIFs was contained in the so-called “Decree on Competitiveness” (Decreto Competitività)2, which provided the performing of direct lending by CIUS. Nevertheless, the lack of coordination between this regulation and the other Italian provisions governing the matter resulted in several uncertainties relating to its interpretation and implementation3.
Thereafter, Law Decree of 14 February 2016 no18 has expressly regulated direct lending by Italian and EU AIF4 assigning to the Bank of Italy the responsibility for implementing specific rules concerning direct lending by EU AIFs5. Up until now, the lack of this secondary regulation has limited the business opportunities of EU AIFs leading to unequal treatment between Italian and EU AIFs.
The Regulation has therefore filled this legal gap defining requirements and conditions of direct lending by EU AIFs and re-establishing equal treatment between Italian and EU AIFs.
2. Direct lending by EU AIFs
EU AIFs may lend directly to Italian borrowers (other than Italian consumers) if the following conditions are met6:
- The EU AIF is authorized to lend by the competent authority in its home member state.
- The EU AIF is a closed-end fund, and its operating rules (with particular reference to those relating to its investors) are similar to those applicable to Italian AIFs.
- The rules on risk limitation and diversification (including limitations on leverage ratio) applicable to the EU AIF under the regulations of its home country are equivalent7 to those applicable to Italian AIFs.
2.2 Application with the Bank of Italy
EU AIFs which intend to perform direct lending activity in Italy must file a notice with the Bank of Italy at least 60 days before starting their activity.
The notice shall contain the main information relating to the AIF—or its division which intends to operate in Italy—and its manager8, as well as the documentation providing evidence of the requirements illustrated in paragraph 2.1 above and explaining the operetional scheme of the AIF9.
The Bank of Italy, after verifying the documentation received, confirms the completeness10 of the application through a “confirmation receipt.” Within the following 60 days the Bank of Italy may prohibit the fund from commencing its lending activity in Italy11. At the expiry of this 60 days term, without any express prohibition from the Bank of Italy, the fund may commence its activity in Italy.
EU AIFs performing direct lending activity in Italy are subject to reporting duties vis-à-vis the Bank of Italy. These reporting duties consist, inter alia, in the obligation of the fund’s manager to send the fund management report to the Bank of Italy within 10 days from its approval, as well as to notify the Bank of Italy promptly of any change to the information provided during the application procedure12.
Furthermore, the managers of EU AIFs performing direct lending in Italy are subject to the transparency provisions (and relevant sanctions) set forth by the Italian Banking Act in relation to contractual conditions and relationships with customers13.