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Revised AIFMD may harmonise European lending

The revised Various 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 companion at regulation agency Linklaters.

“That is principally the primary time it’s moved into product regulation, impacting how managers elevate 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 nations are simpler than others to lend in. As an example, the UK is a simple market – except you’re lending to customers there may be little oversight from the AIFMD. In different nations, it’s tougher and requires considerably extra structuring and in some it’s close to unattainable and not using a banking licence.

“The extension concerning mortgage origination provides some chance of harmonisation. Some nations may select to ‘gold plate’ that with further rules, nevertheless it’s a optimistic factor.”

Nonetheless, the revised AIFMD may current challenges for EU fund managers which are lending into the US.

“One in every of these [complications] is ECI danger – successfully tax leakage for loans popping out of the US,” mentioned Keogh.

“Sponsors use various approaches to mitigate this leakage, one in all which includes a main lender holding (or ‘seasoning’) a mortgage for a time frame after which promoting the mortgage to a different car. Below 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 revealed 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 yr to satisfy the extra information reporting necessities.

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