FRANCE Law and Practice Contributed by: Arnaud Fromion, Frédéric Guilloux and Pierre-Benoît Pabot du Châtelard, Clifford Chance
CRDVI The current European Capital Requirements Directive (CRD) provides for a harmonised regime on banking business (including lending) across the European Union. CRD has, however been amended among other matters to include lending from outside of the European Union, but is yet to be implemented across the European Union. It is referred to as CRDVI in its amended form. CRDVI introduces rules on lending by non-EU credit institutions (ie, banks) to European bor - rowers and will require such non-EU credit insti - tutions to set up a branch office in the country of the borrower and obtain authorisation locally (exemptions are available). Other types of non- EU based lenders should remain unaffected pro - vided they do not meet the materiality require - ments of qualifying as a credit institution under CRDVI. Private credit funds should therefore not be affected in France. CRDVI implementing legislation is, however, still to be published in France. CRDVI should be implemented by 11 January 2027. 2. Regulatory Environment 2.1 Licensing and Regulatory Approval Under the French banking monopoly principle, no person other than a credit establishment (licensed lending institution) is allowed to carry on banking transactions in France on a habitual basis. As a result, private debt investments directly made available by private debt lenders to French borrowers are usually structured in the form of a bond issue, and documented under a subscrip -
dential and conduct of business rules. These rules are general in nature and apply to business operations and dealings with investors generally. AIFMD also contains rules which are specific to investment techniques (such as leverage) and which are specific to certain asset classes (such as private equity) but is silent on loan origination. It has, however, been amended (to include loan origination among other matters) but is yet to be implemented across the European Union. It is referred to as AIFMD2 in its amended form. AIFMD2 introduces a range of rules on loan orig - ination. These include subject matters such as: • implementing policies, procedures and pro - cesses for the granting of loans; • implementing policies, procedures and pro - cesses for assessing credit risk; • loan concentration of 20% of the fund’s capital (called and uncalled contributions) to a single borrower of a certain type; • leverage restrictions (175% for open-ended funds and 300% for closed-ended funds); and • prohibition to grant loans to the fund manager (or its staff) or to its delegates, to the fund’s depositary (or its delegates), or to group companies. AIFMD2 should be implemented by 16 April 2026. After such date, EU credit funds meeting the requirements set out by the AIFMD2 in relation to loan origination would be permitted to lend in the territory of the EU member states, including in France. This being said, AIFMD2 provides that an EU member state may prohibit credit funds from lending to consumers.
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