The Central Bank of Ireland has issued a consultation paper that calls for a lift to the prohibition on hedge fund lending. The paper also sets out a framework of rules for specialist loan funds that is in line with the various alternative investment funds management regulatory regimes within the EU.
The paper contains a variety of proposals to mitigate liability risks within the financial system, including making loan originating qualifying investor AIFs closed-ended, setting leverage limits, and putting strict requirements on these funds to keep their investors well-informed on the lending they would do.
In addition, a number of key protections are imported from banking regulation concerning credit assessment quality, stress testing and related-party origination. Institutional and professional investors would be the eligible investors. The proposed rules are the result of a year-long process of discussion and consultation with industry and regulatory peers which included the European Systemic Risk Board.
Proposed reporting requirements within the paper would more closely align reporting rules for individual bank loans and loans made by alternative investment funds. The paper also notes that banks may find it advantageous to......................