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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 asked ESMA to provide input on the key issues in view of the establishment of a common EU approach.