ESMA reports on EU framework for loan origination by investment funds

The European Securities and Markets Authority (ESMA) has today 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 intends to consult on establishing a common EU approach and asked ESMA to provide input on the key issues on which the consultation could focus.

The ESMA statement and the Opinion on Loan Origination are available here.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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