The Central Bank of Ireland specifically identified leverage as a continuing important regulatory theme for the funds sector. This was in a speech by Gerry Cross, CBI director of Financial Regulation – Policy and Risk where he spoke about focusing on investor outcomes and financial stability. Mr Cross mentioned a need to consider the potential refinement of leverage measures under AIFMD. AIFMD already provides for the imposition of leverage limits by regulators where deemed necessary. He also noted that there are other issues which must be addressed in terms of the macro prudential toolkit under AIFMD. Mr Cross referenced the ESRB 2018 recommendations in terms of asset management which identified the need for ESMA to give guidance on the design, calibration and implementation of macro prudential leverage limits under Article 25 of AIFMD.
Mr Cross also commented that, when addressing systemic risk, "we should not fall into the trap of thinking about investment funds in the same way as we think about banks. To do so would not only lead to sub-optimal results in terms of economic outcomes, it would also run the risk of failing to address the issue about which we are concerned."
You can get in touch with your usual contact in the A&L Goodbody Asset Management & Investment Funds department for context and further information in relation to this commentary.
