On the 10th November 2020, the Malta Financial Services Authority (‘MFSA') announced that it has restructured its Loan Funds Regime. The restructuring exercise was undertaken to reflect market developments and the current economic scenario, whilst also taking into consideration the direction being taken at EU level with regard to loan origination by funds.
The MFSA's objective during the exercise was to re-evaluate the regulatory approach to the market and achieve an equilibrium between the need for a sound regulatory framework and a regime which is pragmatic and accessible to the fund industry.
The key changes effected to the Loan Fund Rules include the following:
- A loan fund may now be set up within an umbrella scheme, even if other sub-funds within the scheme are not established as loan funds;
- Borrowing restrictions and certain investment restrictions have been removed;
- The leverage limit is now allowed to up to 200% of the NAV of the fund;
- Loans cannot be originated to certain debtors, such as individuals, collective investment schemes or the fund manager.
The new rules shall apply to new applicants applying for a fund licence to be established in terms of the Loan Funds Rules, with effect from the 10th November 2020.
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