The Central Bank of Ireland (the Central Bank) has published a discussion paper in relation to loan origination by Irish investment funds. This paper follows an information gathering process conducted by the Central Bank which included discussions with other regulators, industry representative bodies, fund service providers and investment managers engaged in loan origination and participating in loan syndications. The discussion paper details the issues that the Central Bank has identified will require consideration where investment funds are permitted to source loan assets by originating loans and, in particular, the dicussion paper sets out the Central Bank's view in relation to the differing regulatory risks between loan origination and loan participation. The discussion paper raised a number of key questions, which are as follows:

  1. Is there a public good which could be served by relaxing the current regulatory constraint whereby investment funds are prohibited from origination loan?
  2. What are the "shadow banking" risks raised by the relaxation of the current policy?
  3. In what way could these risk be mitigated such that the loan origination by investment funds could be a viable credit channel?
  4. Does the current alternative investment fund rulebook (AIF Rulebook) provide sufficient protections for investors in the case where investment funds are allowed to originate loans?

The Central Bank has asked for any industry participants considering this to respond to the discussion paper by 13 September 2013 by emailing a response in word format to clearly labelled "Loan Origination Discussion" and intends to publish written contributions.