ESMA Guidelines and Recommendations

ESMA publishes Opinion on EU framework for loan origination by investment funds

ESMA Guidelines and Recommendations

Date: 02 February 2016

On 12th April 2016, the European Securities and Markets Authority (ESMA) published an Opinion addressed to the European Parliament, the Council and the Commission on the components necessary for a common European framework which applies to loan origination by investment funds.

The Opinion, which forms part of ESMA’s ongoing work on the Capital Markets Union, sets out ESMA’s views on elements such as the authorisation of loan-originating funds and their managers, eligible investors, organisational requirements and leverage.

Loan origination means that an investment fund provides credit (originates a loan), acting as a sole or a primary lender, to borrowers such as small or medium enterprises (SMEs). As such, this activity represents an alternative form of market-based financing.

Several EU Member States have set up bespoke frameworks for loan origination by funds domiciled in their country which means that funds operating cross-border need to comply with different requirements. The European Commission therefore asked ESMA to provide input on the key issues in view of the establishment of a common EU approach.