New Products
Irish Loan-Origination Funds Industry Gets Closer To Takeoff

The Irish Funds Industry Association yesterday welcomed the move by the country’s central bank to complete the framework for what are called loan-origination funds, see as an alternative to bank finance.
The Irish
Funds Industry Association yesterday welcomed the move by the
country’s central bank to complete the framework for
"loan-origination funds", which are seen as an alternative to
bank finance.
The association said that once it becomes fully operational,
Ireland will have the first regulatory regime in the European
Union for loan funds, working under the umbrella of the
Alternative Investment Fund Managers Directive.
Authorised managers can market loan origination funds within the
EU under the AIFMD passport. The funds will be open to qualifying
investors including pension funds, insurers, banks and high net
worth individuals that make an initial minimum investment of
€100,000 ($60,994).
The development of loan origination funds comes at a time when
conventional lending by banks has been squeezed in the aftermath
of the 2008 financial crisis and the consequent rise in banks’
capital requirements.
The loan origination market is currently more developed in the US
where about 80 per cent of this work takes place via capital
markets. In Europe, the situation is reversed, where
approximately 80 per cent of all lending is performed by
commercial banks, suggesting that even a modest change will see a
significant rise in business, the association said.
The new loan origination fund product will be structured as a
Qualifying Investor Alternative Investment Fund, or QIAIF.
The central bank will permit QIAIFs to lend subject to specific
investor protections and risk management safeguards covering
credit assessment, diversification, liquidity limitations,
investor due diligence, leverage, disclosure, stress testing and
reporting.
The new fund product will be introduced via a dedicated section
in the Central Bank’s AIF Rulebook and it is thought that the
Central Bank intends to begin accepting applications soon.