On 7 February 2018, the Central Bank of Ireland announced that it intends to amend the rules governing Loan-Originating Qualifying Investor AIFs, or L-QIAIFs, by broadening the range of activities permitted.
Background
In 2014, a specific regulatory regime was introduced by the Central Bank, allowing a new type of fund, namely the L-QIAIF, to originate loans.
At present, L-QIAIFs are restricted from engaging in activities other than lending and related operations. This was viewed as overly restrictive, particularly as L-QIAIFs were not permitted to invest in other assets such as debt or equity.
In 2017, significant enhancements were made to allow L-QIAIFs to acquire high yield instruments or equity investments issued by those borrowers that the L-QIAIF had granted loans to. Such enhancements are consistent with the central aim of the Capital Markets Union, ie the promotion of alternative sources of non-bank lending to the EU economy.
Changes to Current Rules
In addition to issuing loans and acquiring loan participations, from March 2018, L-QIAIFs will be permitted to invest in debt or credit instruments. These changes will be reflected in an amendment to the Central Bank's AIF Rulebook which is expected to take effect on 7 March 2018.
Comment
Ireland continues to be a domicile of choice for investment funds and capital raising. Such changes are to be welcomed and should provide greater flexibility for loan origination in Ireland, particularly as the Irish regulatory landscape evolves. It is expected that the L-QIAIF regime will become more popular as a result of the changes.
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