The revised Different Funding Fund Managers Directive (AIFMD) may result in a pan-European passport for lending actions, harmonising personal 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 personal credit score fund managers might want to adjust to stricter necessities.
“AIFMD was first conceived as a supervisor regime,” mentioned Matthew Keogh, funding funds accomplice at legislation agency Linklaters.
“That is principally the primary time it’s moved into product regulation, impacting how managers increase personal 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 international locations are simpler than others to lend in. As an illustration, the UK is a straightforward market – until you’re lending to shoppers there may be little oversight from the AIFMD. In different international locations, it’s tougher and requires considerably extra structuring and in some it’s close to inconceivable with out a banking licence.
“The extension relating to mortgage origination affords some chance of harmonisation. Some international locations may select to ‘gold plate’ that with additional laws, but it surely’s a optimistic factor.”
Nonetheless, the revised AIFMD may current challenges for EU fund managers which are lending into the US.
“Certainly one of these [complications] is ECI threat – successfully tax leakage for loans popping out of the US,” mentioned Keogh.
“Sponsors use a variety of approaches to mitigate this leakage, considered one of which entails a main lender holding (or ‘seasoning’) a mortgage for a time frame after which promoting the mortgage to a different automobile. Underneath the revised Directive, an EU managed fund will be unable 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 printed within the EU’s official journal. Member states have two years to undertake the principles in nationwide legal guidelines and funds then have an extra 12 months to fulfill the extra knowledge reporting necessities.
