COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT Accompanying the Proposal for a Directive of the European Parliament and of the Council amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds
Date: 2021-11-25
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: European Securities and Markets Authority, UCITS fund, alternative investment, exchange of information, financial legislation, financial risk, financial supervision, loan, provision of services, transfer of competence

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   EUROPEAN COMMISSION  Brussels, 25.11.2021  SWD(2021) 341 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT REPORT  Accompanying the  Proposal for a Directive of the European Parliament and of the Council amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds {COM(2021) 721 final} - {SEC(2021) 570 final} - {SWD(2021) 340 final}  
 
 
Executive Summary Sheet 

Impact assessment on Proposal for a Directive amending Directive 2011/61/EU of the European Parliament and 
of  the  Council  of  8  June  2011  on  Alternative  Investment  Fund  Managers  and  Directive  2009/65/EC  of  the 
European Parliament and of the Council of 13 July 2009 on undertakings for collective investment in transferable 
securities 

A. Need for action 

Why? What is the problem being addressed?  
Based on the conclusions of the Commission report and on stakeholder feedback from the public consultation on 
the functioning  of the AIFMD, the Directive  has had  a mostly positive  impact in creating an internal  market for 
AIFs,  allowing  more  effective  supervisory  oversight  and  transparency  of  fund  activities  and  thus  improving 
investor protection. At the same time, the report and consultation highlighted a number of areas where targeted 
improvements  could  be  made  to  further  improve  the  Directive’s  effectiveness  and  address  areas  where 
supervisory  authorities  differ  in  their  interpretations  of  the  legal  text.  Monitoring  and  managing  the  risks  to 
financial  stability  could  be  improved,  in  particular,  in  relation  to  new  developments  in  or  in  some  cases 
underdevelopment  of  Europe’s  AIF  market,  including  direct  lending  by  investment  funds.  Finally,  where 
investment managers outsource their functions to third parties, national interpretation and application of AIFMD 
and  UCITSD  delegation  rules  differ,  thus  raising  concerns  about  investor  protection  in  the  European  Union. 
These  gaps  may  lead  to  spillover  risks  to  the  broader  financial  system  but  also  limit  the  ability  of  supervisory 
authorities to identify and mitigate emerging risks to the financial system.  

What is this initiative expected to achieve?  
This initiative’s main objective is to improve the effectiveness and legal functioning of the AIFMD in line  with its 
primary  objectives  of  investor  protection,  reducing  the  risks  posed  by  AIFs  to  overall  financial  stability  and 
furthering AIF market integration.   

What is the value added of action at the EU level?  
The  objectives  of  the  AIFMD  to  improve  the  market  integration  of  AIFs,  ensure  overall  financial  stability  and 
uniform  investor  protection  rules  cannot  be  achieved  by  the  Member  States  individually.  These  market-wide 
effects can only be achieved  by taking measures  at  EU  level. In accordance with the principles  of subsidiarity 
and  proportionality,  the  AIFMD  does  not  go  beyond  what  is  necessary  to  achieve  its  objectives,  as  set  forth 
when the AIFMD was first introduced.   

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  
To  achieve  the  objectives  mentioned  above,  this  initiative  explores  a  range  of  policy  options  and  identifies 
preferred choices in the following areas:  (i) introduce harmonised rules for AIFMs managing funds active in the 
direct lending space (LOFs); (ii) improve the supply of depositary services in smaller markets; (iii) clarify further 
the  requirements  for  fund  managers  delegating  certain  functions  to  third  parties;  (iv)  improve  the  level  of  data 
gathered through regulatory reporting; (v) harmonise the availability of liquidity management tools (LMTs) across 
the Union; and (vi) include central securities depositories (CSDs) in the custody chain to ensure that depositaries 
can fulfil their duties and safeguard the protection of investors.  

Theoretically,  the  European  Securities  and  Markets  Authority  (ESMA)  could  have  been  asked  to  continue 
supervisory  convergence.  However,  it  was  realised  that  deliberations  in  this  respect  have  been  exhausted 
without sufficient progress and that common standards having normative force are needed. 

Who supports which option?  
Many  public  authorities  in  the  EU  are  in  favour  of  harmonising  requirements  for  LOFs.  The  majority  of  the 
public authorities responding to the public consultation supported the proposition to clarify  AIFMD and UCITSD 
delegation  rules.  There  is  broad  support  among  private  and  public  sector  stakeholders  to  harmonise  LMTs. 
The majority of the stakeholders (approximately 70%) and ESMA, in its opinion, support bringing CSDs into the 
custody chain. In their response  to the public consultation,  public  authorities from  Member States  with smaller 
depositary  markets  said  they  supported  the  retained  option  to  empower  NCAs  to  permit  sourcing  depositary 
services  across  the  border.  A  majority  of  stakeholders  would  prefer  an  incremental  approach  to  potential 

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changes to the supervisory reporting requirements for AIFMs and UCITS.  

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)? Maximum 12 lines                                       
The proposal is designed to introduce targeted amendments to address the issues highlighted in the evaluation 
of  making  the  AIFMD  legal  framework  more  efficient  and  effective.  A  harmonised  regulatory  framework  for 
AIFMs managing  loan-originating  funds will allow these funds to operate in new  markets and scale up  in size, 
providing the real economy with  a source of alternative financing. Greater access to LMTs and NCAs that can 
activate  a  more  nuanced  LMT  will  improve  financial  stability  and  protect  investors.  With  more  comprehensive 
regulatory reporting data, it will be possible to better monitor the build-up of risk in the system. The options for 
cross-border  access  of  depositary  services  and  levelling  the  playing  field  for  LOFs  are  designed  to  increase 
supply and competition in this area and  make the EU AIF market more efficient. Further clarifying the rules on 
delegation  will  ensure  that  investors  are  protected  against  the  potential  abuse  of  delegation  arrangements. 
Bringing  CSDs  into  the  custody  chain  would  ensure  a  high  level  of  investor  protection  that  depositaries  are 
meant to safeguard.  

What are the costs of the preferred option (if any, otherwise main ones)?  
The proposal should not have significant  economic, social  or environmental costs. It should not  lead to AIFMs 
incurring significant additional operating costs, and some of the measures may lead to cost reductions through 
increased  competition  and  efficiencies.  Any  additional  costs  will  be  outweighed  by  the  benefits  to  investor 
protection and overall financial stability. 

How will businesses, SMEs and micro-enterprises be affected?  

The proposal should benefit businesses, including SMEs, by harmonising the requirements for AIFMs managing 
loan-originating AIFs. This will allow these funds to originate credit across the European Union, providing a much 
needed source of alternative financing for  SMEs, particularly SMEs  that may find it difficult  or costly  to secure 
credit from traditional lenders. 

Will there be significant impacts on national budgets and administrations?  
No significant impact on national budgets and administrations is expected until the second phase of the revision 
of supervisory reporting requirements.  

Will there be other significant impacts?  
This  review  will  not  have  any  negative  economic,  environmental  or  social  impact  nor  will  it  have  any  negative 
impact  on  fundamental  rights.  A  liberated  ability  by  AIFs  to  provide  credit  in  a  sustainable  manner  would 
increase available funding for the real economy and in particular for SMEs, which often struggle to secure credit 
from  the  banks.  A  vibrant,  yet  orderly,  private  debt  market  will  be  key  in  advancing  the  European  Union’s 
transition to a more sustainable future. 

D. Follow up 

When will the policy be reviewed?  
It  would  be  appropriate  to  start  reviewing  the  AIFMD  in  5  years  after  the  amendments  to  the  legal  framework 
enter into force. The review should analyse the functioning of the LOF market and its risks to financial stability 
and  the  functioning  of  the  depositary  market,  and  it  should  identify  delegation  practices.  It  would  have  to  be 
analysed whether introducing a broader range of LMTs and increasing the granularity of data contributed to the 
stability of the financial system. 

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