Following up on its 2020 Capital Markets Union Action Plan, last week the European Commission published a further CMU package consisting mostly of legislative proposals reviewing the AIFMD and ELTIF regulation as well as modifications to MiFID/R and the creation of a European Single Access Point for market data. Given the importance of investment funds and depositary banking for the local financial centre, this article focuses primarily on the AIFMD and ELTIF revisions.

The ELTIF regime has far from fulfilled the hopes and expectations harboured by its creators. Although with 57 funds, according to the latest ESMA data, the 2.4 billion euros in assets under management seem like a drop in the ocean compared to the trillions the European asset management industry looks after. With its legislative proposal the European Commission aims at making the product more attractive by broadening the scope of eligible assets and allowing for fund-of-fund strategies. The EU executive also proposed simplifying distribution to retail investors by removing the 10,000 euro minimum investment and the 10% of the client’s portfolio limit, while aligning the suitability assessment with the MiFID II rules.

In its proposals on the AIFMD review the Commission stayed true to its word of a targeted exercise, rather than a complete overhaul of the framework. Most notable are some proposed changes regarding delegation, liquidity management tools and requirements regarding loan granting activities by investment funds. Less prominent, but relevant for the depositary banking community, are elements on the provision of depositary services. While the Commission did not see an immediate merit of introducing a depositary passport, the need for the latter has nevertheless been enshrined in a review clause and will be re-assessed a few years down the road. Suggested changes are also streamlined into the UCITS directive.


We will now thoroughly assess the texts that the Commission has put on the table for any impact they might have on our members. Given the nature of the Luxembourg financial centre not only as an investment fund but also as a depositary banking hub, any changes in the applicable legislation is of interest to our membership. We will also keep an eye on the suggested ELTIF distribution modalities to retail investor.



Adviser Financial Markets at the ABBL

The draft legislative proposals are now due to be discussed in both the Council and the European Parliament. Both institutions are expected to bring their own modifications before agreeing on a compromise final text. The process is expected to last at least well into the upcoming year if not 2023.

Antoine Kremer and Marilyn Rinck