We set out below an overview of some recent regulatory developments which might be of interest to financial service providers including investment funds and fund management companies:

QIAIF Loan Origination


On 28 July 2014 the Central Bank of Ireland (the “Central Bank”) issued a consultation paper (“CP 85”) addressing the issue of loan origination by Irish domiciled investment funds. CP 85 will be welcomed by the Irish funds industry and the wider business community both of which have lobbied for many years for the removal of the prohibition on Irish domiciled investment funds engaging in loan origination.


Under the existing rules, Irish domiciled investment funds are prohibited from originating loans as part of their strategy to source assets for investment purposes primarily due to the perceived risks attached to such strategies. A discussion paper issued by the Central Bank during the course of 2013, which sought industry feedback in relation to this issue, attracted considerable interest from industry participants.

Proposed New Regulatory Regime

Having carefully considered the feedback received, the Central Bank has indicated in CP 85 that it proposes to introduce a new set of regulatory requirements that would apply to a type of fund which has a primary objective of loan origination. The fund in question must be authorised as a Qualifying Investor AIF or ‘QIAIF’ and as such, it would only be available to investors who meet the Qualifying Investor criteria. Furthermore, the fund would be required to appoint an alternative investment fund manager (“AIFM”) pursuant to the AIFM Directive.

It is proposed that the following requirements would be imposed on a QIAIF whose sole strategy is loan origination (a “Loan  Originating  QIAIF”):

  • Credit Assessment & Management Process – a Loan Originating QIAIF would be required to implement and maintain effective credit assessment and management processes with established policies which are consistent with the requirements  for  credit  institutions.
  • Diversification Requirements – a Loan Originating QIAIF would be required

to disclose, in its prospectus, a risk diversification strategy which would achieve a portfolio of loans which is diversified and which would limit exposure to any one issuer or group to 25% of net assets within a specified timeframe.

  • Liquidity – CP 85 provides that the Loan Originating QIAIF must be closed-ended in nature. However, limited redemption rights may be offered to unitholders at the discretion of the fund.
  • Investor Due Diligence – CP 85  provides for the introduction of specific requirements with regard to investor due diligence. In particular, where an AIFM intends to provide access to its records/ staff to any investor for the purposes of a due diligence process, it must ensure that such access has been made available, on a non-discriminatory basis, to all unitholders.
  • Valuation – the Central Bank does not intend to include any additional rules  in relation to the valuation of assets of a Loan Originating QIAIF.
  • Leverage – a Loan Originating QIAIF would be required to have total asset coverage of at least 200%.
  • Investor Disclosure – itemised disclosure of each loan in periodic  reports would be required (in addition to  other reporting requirements imposed on an AIFM  pursuant to the AIFM Directive).
  • InterconnectednesswithBanking Sector - it is proposed that specific rules will apply where there is any on-going connection between a credit institution and a Loan Originating QIAIF.
  • Reporting & Stress Testing – CP 85 requires the introduction of comprehensive stress testing and reporting on individual loans.


While the specific requirements of the new proposed regulatory regime for Loan Originating QIAIFs will require fine- tuning, CP 85 is a positive step towards implementing a regulatory regime which would permit regulated funds to originate loans, thus ensuring that the wider business community can benefit from alternative sources of funding.

The consultation paper, which is available here, closes on 25 August 2014.

Other Recent Developments:


On 29 July 2014 the Irish Collective Asset- management Vehicle Bill 2014 (the “ICAV Bill”) was published. The ICAV Bill will facilitate a new form of Irish corporate investment vehicle which is designed specifically for investment funds and it is widely regarded as a positive development for the Irish funds industry. The ICAV Bill generally follows the ‘General Scheme’ of the Bill which was published by the Irish Government in December 2013 – please click here to access our earlier briefing note in relation to the ICAV regime.

The Irish Government has indicated that publication of the ICAV legislation will be a priority - it is hoped that the ICAV Bill will be enacted into law before the end of 2014.


On 23 July 2014 the Council of the EU published a press release announcing  that it has adopted the UCITS V Directive (“UCITS V”) (UCITS V was formally approved by the European Parliament in plenary session earlier this year). UCITS V will introduce new requirements regarding depositary functions, remuneration policies and sanctions.

Publication of UCITS V in the Official Journal of the EU is expected in the third quarter of 2014. It is anticipated that Member States will then have 18 months to transpose UCITS V into national law.