Skip to main content
SpringerLink
Log in

Lending and Its Risks: A Comparison Between Banks and Alternative Investment Funds

  • Chapter
  • First Online:
Alternative Lending

Part of the book series: EBI Studies in Banking and Capital Markets Law ((ESBCML))

  • 281 Accesses

Abstract

Today, the role of banks includes the development of new financial instruments, the marketing and sale of these instruments to the public, and the creation and administration of trading venues which can give public access to the capital markets.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
eBook
USD 16.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 109.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    Grundmann, Stefan,“Staub Handelsgesetzbuch Großkommentar, Bd. 11/1: Bankvertragsrecht – Investment Banking I,” 5. Aufl. Berlin/München/Boston, de Gruyter, 2017, 5.Teil, 1.Abschnitt, Rn.1.

  2. 2.

    Stuart Greenbaum, Thakor Anjan, and Boot Arnoud, Contemporary Financial Intermediation, Third Edition (Elsevier, 2015), 134.

  3. 3.

    Stuart Greenbaum, Thakor Anjan, Boot Arnoud, 139.

  4. 4.

    Stuart Greenbaum, Thakor Anjan, Boot Arnoud, 140.

  5. 5.

    Rose, Peter S. and Sylvia C. Hudgins, Bank Management & Financial Services, Eighth Edition, internat. Edition, The McGraw-Hill/Irwin Series in Finance, Insurance and Real Estate (Boston: McGraw-Hill, 2010), 552.

  6. 6.

    Rose and Hudgins, 553.

  7. 7.

    Rose and Hudgins, ibid.

  8. 8.

    Donald R. Chambers, et al., Alternative Investments: CAIA Level I, Third Edition, Wiley Finance (Hoboken, NJ: Wiley, 2015).

  9. 9.

    Stuart Greenbaum, Thakor Anjan, Boot Arnoud, Contemporary Financial Intermediation, 137.

  10. 10.

    Rose and Hudgins, Bank Management & Financial Services, 548ff.

  11. 11.

    Rose and Hudgins, 550.

  12. 12.

    Rose and Hudgins, 551.

  13. 13.

    Rose and Hudgins, ibid.

  14. 14.

    Allen N. Berger, Philip Molyneux, and John O. S. Wilson, eds., The Oxford Handbook of Banking, Second Edition (Oxford; New York: Oxford University Press, 2015), 312.

  15. 15.

    Rose and Hudgins, Bank Management & Financial Services, 516; Stuart Greenbaum, Thakor Anjan, Boot Arnoud, Contemporary Financial Intermediation, 137.

  16. 16.

    Molyneux Berger, and Wilson, The Oxford Handbook of Banking, 326ff.

  17. 17.

    Rose and Hudgins, Bank Management & Financial Services, 522f.

  18. 18.

    Stuart Greenbaum, Thakor Anjan, Boot Arnoud, Contemporary Financial Intermediation, 144ff; Rose and Hudgins, Bank Management & Financial Services, 524ff.

  19. 19.

    E. P. Ellinger, Eva Z. Lomnicka, and Richard Hooley, Ellinger’s Modern Banking Law, Fifth Edition (Oxford, UK; New York: Oxford University Press, 2011), 773.

  20. 20.

    Ross Cranston, et al., Principles of Banking Law, Third edition (Oxford: Oxford University Press, 2017), 430.

  21. 21.

    Philip Wood, International Loans, Bonds, and Securities Regulation, Law and Practice of International Finance (London: Sweet & Maxwell, 1995), 29.

  22. 22.

    Ellinger, Lomnicka, and Hooley, Ellinger’s Modern Banking Law, 774f.; Cranston et al., Principles of Banking Law, 432.

  23. 23.

    Cranstond et al., Principles of Banking Law, 440f.; Ellinger, Lomnicka, and Hooley, Ellinger’s Modern Banking Law, 776.

  24. 24.

    The default risk or otherwise the probability of default (PD) is the probability that a default incident will happen. The loss risk or in other terms the loss given default (LGD) is a parameter which estimates the expected loss per claim in the case of the default of a borrower. For more see: Lending Bank Risk Chapter, Credit Risk:Default Risk, and Loss given Default.

  25. 25.

    Rose and Hudgins, Bank Management & Financial Services, 573f.; Stuart Greenbaum, Thakor Anjan, Boot Arnoud, Contemporary Financial Intermediation, 173f.

  26. 26.

    “Used globally, LIBOR is often referenced in derivative, bond and loan documentation, and in a range of consumer lending instruments such as mortgages and student loans. It is also used as a gauge of market expectation regarding central bank interest rates, liquidity premiums in the money markets and, during periods of stress, as an indicator of the health of the banking system. It is produced for five currencies (CHF, EUR, GBP, JPY and USD) and seven tenors (Overnight/Spot Next, 1 Week, 1 Month, 2 Months, 3 Months, 6 Months and 12 Months) based on submissions from a reference panel of between 11 and 16 banks for each currency, resulting in the publication of 35 rates every applicable London business day. “ICE LIBOR”, https://www.theice.com/iba/libor (accessed 4 February 2019). https://www.theice.com/iba/libor.

  27. 27.

    Rose and Hudgins, Bank Management & Financial Services, 574ff.

  28. 28.

    “Understanding the Libor Scandal | Council on Foreign Relations”, https://www.cfr.org/backgrounder/understanding-libor-scandal (accessed 4 February 2019). https://www.cfr.org/backgrounder/understanding-libor-scandal.

  29. 29.

    “Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on Indices Used as Benchmarks in Financial Instruments and Financial Contracts or to Measure the Performance of Investment Funds and Amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014 (Text with EEA Relevance),” https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32016R1011 (accessed 4 February 2019).

  30. 30.

    “ICE LIBOR Statement,” https://www.theice.com/publicdocs/LIBOR_Benchmark_statement.pdf.

  31. 31.

    “The End of LIBOR - Tick Tock,” https://www.economist.com/leaders/2018/09/27/the-end-of-libor.

  32. 32.

    Peter L. Bernstein, Against the Gods: The Remarkable Story of Risk (Hoboken, USA: Wiley, Incorporated, 2008), http://ebookcentral.proquest.com/lib/eui/detail.action?docID=694544; Matthias Beck and Beth Kewell, Risk: A Study of Its Origins, History and Politics / Matthias Beck, Beth Kewell (Singapore: World Scientific, 2014); Michael R. Powers, Acts of God and Man: Ruminations on Risk and Insurance (Columbia University Press, 2011).

  33. 33.

    The first known form of gambling was a dice game played with a kind of dice like astragalus in ancient African and Middle Eastern cultures. For more see: Beck and Kewell, Risk, 15.

  34. 34.

    Other definitions of risk include the following: a source of uncertainty; something exposed to uncertainty; the anticipated magnitude of a given uncertain outcome; and the variability of the magnitude of a given uncertain outcome. For more see: Powers, Acts of God and Man, xii. Further, risk denotes the possibility that an undesirable state of reality (adverse effects) may occur as a result of natural events or human activities. See: Ortwin Renn, Risk Governance: Coping with Uncertainty in a Complex World, 1.

  35. 35.

    William D. Rowe, An Anatomy of Risk, Wiley Series on Systems Engineering and Analysis (New York: Wiley, 1977), 24.

  36. 36.

    Bernstein, Against the Gods, 11ff.

  37. 37.

    Ulrich Beck, Risk Society: Towards a New Modernity (Sage, 1992), 19.

  38. 38.

    Tony van Gestel and Bart Baesens, Credit Risk Management: Basic Concepts: Financial Risk Components, Rating Analysis, Models, Economic and Regulatory Capital (Oxford; New York: Oxford University Press, 2009), 9–10.

  39. 39.

    Interest rate risk can be classified also as subcategory of market risk. We will assess market risk and its subcategories below, under part a ii.

  40. 40.

    Stuart Greenbaum, Thakor Anjan, Boot Arnoud, Contemporary Financial Intermediation, 90–91.

  41. 41.

    Stuart Greenbaum, Thakor Anjan, Boot Arnoud, 91; Gestel and Baesens, Credit Risk Management, 24; Darrell Duffie and Kenneth J. Singleton, Credit Risk: Pricing, Measurement, and Management, Princeton Series in Finance (Princeton, NJ: Princeton University Press, 2003), 4.

  42. 42.

    Gestel and Baesens, Credit Risk Management, 24.

  43. 43.

    Amalendu Ghosh, Managing Risks in Commercial and Retail Banking (Singapore: Wiley Singapore, 2012), chap 1.3, http://site.ebrary.com/id/10538600.

  44. 44.

    According to Basell: “The counterparty credit risk is defined as the risk that the counterparty to a transaction could default before the final settlement of the transaction’s cash flows. An economic loss would occur if the transactions or portfolio of transactions with the counterparty has a positive economic value at the time of default. Unlike a firm’s exposure to credit risk through a loan, where the exposure to credit risk is unilateral and only the lending bank faces the risk of loss, the counterparty credit risk creates a bilateral risk of loss: the market value of the transaction can be positive or negative to either counterparty to the transaction. The market value is uncertain and can vary over time with the movement of underlying market factors”, For more see Basel Committee on Banking Supervision, “Minimum Capital Requirements for market risk,” n.d., 19.

  45. 45.

    Weidong Tian, ed., Commercial Banking Risk Management (New York: Palgrave Macmillan US, 2017), 56, https://doi.org/10.1057/978-1-137-59442-6.

  46. 46.

    Gestel and Baesens, 25f.; Simon Gleeson, International Regulation of Banking: Capital and Risk Requirements, Second Edition (Oxford, UK: Oxford University Press, 2012), pt. 7.08.

  47. 47.

    Gestel and Baesens, Credit Risk Management, 28–29.

  48. 48.

    Ghosh, Managing Risks in Commercial and Retail Banking, chap. 6.1.

  49. 49.

    Ghosh, chap. 6.1.

  50. 50.

    Ghosh, chap. 6.1.

  51. 51.

    Ghosh, chap. 6.1.

  52. 52.

    “Fixed-rate debt securities have fixed interest rates and fixed maturities. If held to maturity, they offer the benefits of preservation of principal and certainty of cash flow. Prior to maturity, however, the market value of fixed-rate securities fluctuates with changing interest rates.” For more see: “Fixed-Rate Securities,” http://www.investinginbonds.com/learnmore.asp?catid=9&subcatid=52&id=274 (accessed 22 January 2018).

  53. 53.

    Gestel and Baesens, Credit Risk Management, 30. The government rate is the interest rate that the government can set. For example, the U.S. Fed influences monetary policy by setting the Federal funds rate, which is simply the rate that banks use to lend to one another and trade with the Fed. For more see: Investopedia, “How banks set interest rates on your loans,” https://www.investopedia.com/articles/investing/080713/how-banks-set-interest-rates-your-loans.asp (accessed January 2018); Libor is the benchmark interest rate that banks charge each other for overnight, one-month, three-month, six-month, and one-year loans. It's the benchmark for bank rates all over the world. Libor is an acronym for London InterBank Offered Rate. For more see: “What is Libor? How it’s Calculated and Its Impact on You,” https://www.thebalance.com/what-is-libor-how-it-s-determined-and-how-it-affects-you-3305858 (accessed January 2018).

  54. 54.

    Stuart Greenbaum, Thakor Anjan, Boot Arnoud, Contemporary Financial Intermediation, 91–92.

  55. 55.

    “BIS, Principles for Sound Liquidity Risk Management and Supervision - Final Document,” September 25, 2008, 1, https://www.bis.org/publ/bcbs144.htm.

  56. 56.

    Ghosh, Managing Risks in Commercial and Retail Banking, chap. 17.1.

  57. 57.

    Stuart Greenbaum, Thakor Anjan, Boot Arnoud, Contemporary Financial Intermediation, 92. For more about credit rationing see: Columbia Business School, Credit Rationing, https://www0.gsb.columbia.edu/faculty/ccalomiris/papers/Credit%20Rationing.pdf (accessed April 2018).

  58. 58.

    “Liquidity Shock” means to have an urgent need for funds.

  59. 59.

    Stuart Greenbaum, Thakor Anjan, Boot Arnoud, Contemporary Financial Intermediation, 127.

  60. 60.

    Stuart Greenbaum, Thakor Anjan, Boot Arnoud, 122.

  61. 61.

    Stuart Greenbaum, Thakor Anjan, Boot Arnoud, 121.

  62. 62.

    Justin Kuepper, “What Was the Asian Financial Crisis?” The Balance, https://www.thebalance.com/what-was-the-asian-financial-crisis-1978997 (accessed 12 April 2018); Ghosh, Managing Risks in Commercial and Retail Banking, chap. 6.1.

  63. 63.

    Basel Committee on Banking Supervision (BCBS): Minimum Capital Requirements for market risk, https://www.bis.org/bcbs/publ/d352.pdf (accessed January 2018), 5.

  64. 64.

    Hennie van Greuning and Sonja Brajovic Bratanovic, Analyzing Banking Risk: A Framework for Assessing Corporate Governance and Financial Risk Management (Washington, DC: World Bank, 2000), 189.

  65. 65.

    Anthony Saunders and Marcia Millon Cornett, Financial Institutions Management: A Risk Management Approach, Ninth Edition (Dubuque: McGraw-Hill Education, 2017), 449.

  66. 66.

    Richard Apostolik and Christopher Donohue, Foundations of Financial Risk: An Overview of Financial Risk and Risk-Based Financial Regulation, Wiley Finance Series (Hoboken, NJ: Wiley, 2015), 174.

  67. 67.

    Over-the-Counter means the transactions/assets trading that take place on a bilateral basis between two corporations, outside of an organized trading facility/trading venue. For more see: IMF, Markets: Exchange or Over-the-Counter, http://www.imf.org/external/pubs/ft/fandd/basics/markets.htm (accessed January 2018).

  68. 68.

    Joël Bessis, Risk Management in Banking, Fourth Edition (West Sussex: Wiley, 2015), 3.

  69. 69.

    Saunders and Cornett, Financial Institutions Management, 450.

  70. 70.

    Apostolik and Donohue, Foundations of Financial Risk, 19ff; Greuning and Brajovic Bratanovic, Analyzing Banking Risk, 2000, 190.

  71. 71.

    Ghosh, Managing Risks in Commercial and Retail Banking, Chapter 16.

  72. 72.

    Ghosh, Chapter 20.

  73. 73.

    Rose and Hudgins, Bank Management & Financial Services, 184.

  74. 74.

    Greuning and Brajovic Bratanovic, Analyzing Banking Risk, 2000, 211f.

  75. 75.

    Greuning and Brajovic Bratanovic, 213.

  76. 76.

    Aboli Gangreddiwar, 8 Risks in the Banking Industry Faced by Every Bank, https://gomedici.com/8-risks-in-the-banking-industry-faced-by-every-bank/ (accessed February 2018).

  77. 77.

    Banks invest beyond their capital resources either by borrowing money from the depositors and other banks or by issuing bonds. Francesco Cannata, ed., Basel III and beyond: A Guide to Banking Regulation after the Crisis (London: Risk Books, 2011), 185.

  78. 78.

    Katia D’Hulster, “The Leverage Ratio: A New Binding Limit on Banks,” World Bank Group, Financial Sector and Private Sector Vice-Presidency, n.d., 1, http://siteresources.worldbank.org/EXTFINANCIALSECTOR/Resources/282884-1303327122200/Note11.pdf.

  79. 79.

    “Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on Prudential Requirements for Credit Institutions and Investment Firms and Amending Regulation (EU) No 648/2012,” https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32013R0575&from=EN (accessed 22 March 2019).

  80. 80.

    H.S. Shin, and T. Adrian, “Liquidity and Leverage. Paper Presented at the “Financial Cycles, Liquidity, and Securitization” Conference Hosted by the International Monetary Fund, Washington, DC, April 18, 2008, 11ff., https://www.imf.org/external/np/seminars/eng/2008/fincycl/pdf/adsh.pdf.

  81. 81.

    Emilios Avgouleas, “Bank Leverage Ratios and Financial Stability: A Micro- and Macroprudential Perspective,” SSRN Scholarly Paper (Rochester, NY: Social Science Research Network, 28 October 2015), 7, https://papers.ssrn.com/abstract=2682675.

  82. 82.

    Anat. R. Admati, Peter M. Demarzo, Martin F. Hellwig, and Paul Pfleiderer, “The Leverage Ratchet Effect,” Stanford Graduate School of Business, 1ff., https://www.gsb.stanford.edu/faculty-research/working-papers/leverage-ratchet-effect (accessed 22 March 2019); Emilios Avgouleas and Jay Cullen, “Excessive Leverage and Bankers’ Pay: Governance and Financial Stability Costs of a Symbiotic Relationship,” SSRN Scholarly Paper (Rochester, NY: Social Science Research Network, 22 March 2014), 8ff., https://papers.ssrn.com/abstract=2412869.

  83. 83.

    Ross Levine, “The Corporate Governance of Banks: A Concise Discussion of Concepts and Evidence,” SSRN Scholarly Paper (Rochester, NY: Social Science Research Network, 1 September 2004), 2ff., https://papers.ssrn.com/abstract=625281.

  84. 84.

    A fire sale is a forced sale of an asset at a reduced price. The seller cannot pay its creditors without selling assets; therefore, she/he is forced to sale the asset. The price is lower because the highest potential bidders are usually involved in the same activity as the seller and they will not have the funds to buy the asset. Perhaps, they are also selling their assets. The only buyers left are nonspecialists who do not have the expertise or the necessary information to evaluate the assets and they are willing to buy the assets only at lower prices. Because of fire sales, risk becomes systemic. For more see: Andrei Shleifer and Robert Vishny, “Fire Sales in Finance and Macroeconomics,” Journal of Economic Perspectives 25, no. 1 (February 2011): 30, https://doi.org/10.1257/jep.25.1.29.

  85. 85.

    Ana Fostel and John Geanakoplos, “Reviewing the Leverage Cycle,” SSRN Electronic Journal, 2013, 4., https://doi.org/10.2139/ssrn.2330422.

  86. 86.

    John Fitz Gerald, “Blowing Bubbles – and Bursting Them: The Case of Ireland and Spain,” n.d., 12ff, http://www.euroframe.org/files/user_upload/euroframe/docs/2009/EUROF09_FitzGerald.pdf.

  87. 87.

    Samuel G Hanson, Anil K Kashyap, and Jeremy C Stein, “A Macroprudential Approach to Financial Regulation,” Journal of Economic Perspectives 25, no. 1 (February 2011): 17ff., https://doi.org/10.1257/jep.25.1.3; Avgouleas, “Bank Leverage Ratios and Financial Stability,” 12.

  88. 88.

    “BCBS, Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework - Comprehensive Version,” June 30, 2006, para. 644, https://www.bis.org/publ/bcbs128.htm.

  89. 89.

    Rose and Hudgins, Bank Management & Financial Services, 185.

  90. 90.

    BCBS, Consultative Document Sound Practices for the Management and Supervision of Operational Risk, December 2010, para.38.

  91. 91.

    BCBS, Sound Practices for the Management and Supervision of Operational Risk, December 2001, para.58ff.

  92. 92.

    Rose and Hudgins, Bank Management & Financial Services, 187.

  93. 93.

    John Hull, Risk Management and Financial Institutions, Fourth Edition, Wiley Finance Series (Hoboken: Wiley, 2015), 479.

  94. 94.

    Ghosh, Managing Risks in Commercial and Retail Banking, Chapter 1.

  95. 95.

    “BCBS, Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework - Comprehensive Version,” June 30, 2006, para. 644, note 90 https://www.bis.org/publ/bcbs128.htm.

  96. 96.

    Deloitteeditor, “Why Reputational Risk Is a Strategic Risk,” http://deloitte.wsj.com/riskandcompliance/2013/10/02/why-reputational-risk-is-a-strategic-risk/ (accessed 10 February 2018).

  97. 97.

    Ghosh, Managing Risks in Commercial and Retail Banking, Chapter 1.

  98. 98.

    Aldo Soprano, ed., Measuring Operational and Reputational Risk: A Practitioner’s Approach, Wiley Finance Series (Chichester, UK; Hoboken, NJ: Wiley, 2009), 159f.

  99. 99.

    Matt Egan, “Wells Fargo’s Reputation Is Tanking, Survey Finds,” CNNMoney, 24 October 2016, http://money.cnn.com/2016/10/24/investing/wells-fargo-fake-accounts-angry-customers/index.html; Sheryl L. Sutter says, “Can Wells Fargo’s Brand Survive Another Scandal?” The Financial Brand, September 12, 2017, https://thefinancialbrand.com/67399/wells-fargo-brand-scandal-crisis/.

  100. 100.

    Rose and Hudgins, Bank Management & Financial Services, 186.

  101. 101.

    Deloitteeditor, “Why Reputational Risk Is a Strategic Risk,” http://deloitte.wsj.com/riskandcompliance/2013/10/02/why-reputational-risk-is-a-strategic-risk/ (accessed 10 February 2018).

  102. 102.

    Ghosh, Managing Risks in Commercial and Retail Banking, Chapter 7.

  103. 103.

    “Recommendations for Securities Settlement Systems,” November 12, 2001, 38, https://www.bis.org/cpmi/publ/d46.htm.

  104. 104.

    “Recommendations for Securities Settlement Systems,” 39.

  105. 105.

    Greuning and Brajovic Bratanovic, Analyzing Banking Risk, 2000, 217.

  106. 106.

    Eddie Cade, Managing Banking Risks (Cambridge: Gresham Books, 1997), 65.

  107. 107.

    Adam B. Ashcraft and Til Schuermann, “Understanding the Securitization of Subprime Mortgage Credit,” SSRN Scholarly Paper (Rochester, NY: Social Science Research Network, 1 March 2008), 7ff., https://papers.ssrn.com/abstract=1071189.

  108. 108.

    Cade, Managing Banking Risks, 40.

  109. 109.

    For a definition of Alternative Investment Funds see: Chapter 1 under Part I-Introduction.

  110. 110.

    For more see: Stowell P. David, “Investment Banks, Hedge Funds and PE,” second edition (Academic Press, 2012), 315.

  111. 111.

    ESMA, Technical advice to the European Commission on possible implementing measures of the Alternative Investment Fund Managers Directive, Final report, ESMA/2011/379, 68.

  112. 112.

    EU Commission Delegated Regulation (EU) No 231/2013 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision.

  113. 113.

    Open-ended funds are those, whose investors have the right to redeem their investments periodically and these funds have no limit on how many shares they can issue. On the other hand, closed-ended funds are those, whose investors do not have the right (with a few exceptions) to redeem their investments earlier than the termination date of the fund. For more see: Katya Tua, “Open-Ended Vs Closed-Ended AIFs,” http://www.mamotcv.com/resources/news/open-ended-vs-closed-ended-aifs (accessed 13 April 2018).

  114. 114.

    CSSF, “Luxembourg Law of 12 July 2013 on Alternative Investment Fund Managers – FAQ,” n.d., 16, https://www.cssf.lu/wp-content/uploads/FAQ_AIFMD.pdf.

  115. 115.

    EIF (Helmut Kraemer-Eis), “Institutional Non-Bank Lending and the Role of Debt Funds,” (EIF Research & Market Analysis, 2014), 15.

  116. 116.

    “Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 Laying down a General Framework for Securitisation and Creating a Specific Framework for Simple, Transparent and Standardised Securitisation, and Amending Directives 2009/65/EC, 2009/138/EC and 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012,” 347 OJ L § (2017), http://data.europa.eu/eli/reg/2017/2402/oj/eng.

  117. 117.

    Dirk Zetzsche, ed., The Alternative Investment Fund Managers Directive, Third edition, International Banking and Finance Law Series, volume 20 (Alphen aan den Rijn, The Netherlands: Kluwer Law International, 2020), 377–378.

  118. 118.

    “Regulation (EU) No 1075/2013 of the European Central Bank of 18 October 2013 Concerning Statistics on the Assets and Liabilities of Financial Vehicle Corporations Engaged in Securitisation Transactions (Recast) (ECB/2013/40),” 297 OJ L § (2013), http://data.europa.eu/eli/reg/2013/1075/oj/eng.; supra note 341, 380f.

  119. 119.

    EU Commission, “AIFMD-Q&A,” https://ec.europa.eu/info/sites/default/files/aifmd-commission-questions-answers_en.pdf (accessed 9 June 2022).

  120. 120.

    Bank of Ireland, “AIF Q&A | Central Bank of Ireland | Central Bank of Ireland - 41 Edition”, ID 1065, https://www.centralbank.ie/regulation/industry-market-sectors/funds/aifs/guidance/aif-q-a (accessed 9 June 2022).

  121. 121.

    CSSF, “Frequently Asked Questions Securitisation,” 14–15, https://www.cssf.lu/wp-content/uploads/files/Titrisation/FAQ_titrisation_231013_eng.pdf (accessed 9 June 2022).

  122. 122.

    “Auslegungsschreiben zum Anwendungsbereich des KAGB und zum Begriff des Investmentvermögens,” BaFin, https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Auslegungsentscheidung/WA/ae_130614_Anwendungsber_KAGB_begriff_invvermoegen.html (accessed 9 June 2022), 2. Für gemeinsame Anlagen.

  123. 123.

    Supra note 117, 384–386.

  124. 124.

    “Regulation (EU) No 1075/2013 of the European Central Bank of 18 October 2013 Concerning Statistics on the Assets and Liabilities of Financial Vehicle Corporations Engaged in Securitisation Transactions (Recast) (ECB/2013/40),” 297 OJ L § (2013), http://data.europa.eu/eli/reg/2013/1075/oj/eng, Art. 1 (1) and (2).

  125. 125.

    Moreno, Luciano, “Direct Lending of Securitisation SPVs - New Supervisory Instructions from Bank of Italy | Insights | DLA Piper Global Law Firm,” DLA Piper, https://www.dlapiper.com/en/italy/insights/publications/2016/03/direct-lending-of-securitisation-spvs/ (accessed 12 June 2022).

  126. 126.

    Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015 on European long-term investment funds. For more on the ELTIF Regulation see the Chapter on Risk Management tools in AIFs.

  127. 127.

    Fabrice Faure-Dauphin and Caroline Marion, “The Securitisation Law Review - The Law Reviews,” https://thelawreviews.co.uk/title/the-securitisation-law-review/france (accessed 12 June 2022); Vincent Hatton, “Reform of French Securitisation Law and Creation of Specialised Financing Vehicles,” Herbert Smith Freehills | Global law firm, 18 October 2017, https://www.herbertsmithfreehills.com/latest-thinking/reform-of-french-securitisation-law-and-creation-of-specialised-financing-vehicles.

  128. 128.

    CSSF, “Questions and Answers on the Statuses of “PFS” -Part II,” pt. 52,https://www.cssf.lu/wp-content/uploads/FAQ_PSF_II_eng.pdf (accessed 12 June 2022); Dentons, “Luxembourg Securitisation Law Substantially Modernised,” https://www.dentons.com/en/insights/alerts/2022/february/11/luxembourg-securitisation-law-substantially-modernised (accessed 12 June 2022); PWC, “An Update on the Regulatory Requirements for Originating Debt from Luxembourg,” PwC, https://www.pwc.lu/en/alternative-investments/update-regulatory-requirements-debt-luxembourg.html (accessed 12 June 2022); L. Thailly, N. Mille, and A. Mendegris, “Luxembourg Corporate: Unregulated Securitisation Vehicles | Ogier,” February 17, 2022, https://www.ogier.com/publications/luxembourg-corporate-unregulated-securitisation-vehicles.

  129. 129.

    ESMA/2011/379, AIFMD Final Report, 69.

  130. 130.

    Apostolik and Donohue, Foundations of Financial Risk, 174.

  131. 131.

    Saunders and Cornett, Financial Institutions Management, 450.

  132. 132.

    BCBS, Principles for the Management of Credit Risk, September 2000, 1.

  133. 133.

    Gestel and Baesens, Credit Risk Management, 26ff.

  134. 134.

    EU Commission, UCITSD 2010/43/EU, July 2010.

  135. 135.

    Art. 3 (8), EU Commission, UCITSD 2010/43/EU, July 2010.

  136. 136.

    Dirk Zetzsche, ed., The Alternative Investment Fund Managers Directive: European Regulation of Alternative Investment Funds, International Banking and Finance Law Series, volume 20 (Alphen aan den Rijn: Kluwer Law International, 2012), 372.

  137. 137.

    Bank of Ireland, Loan Origination by Investment Funds, 2013, 21.

  138. 138.

    Art 3 (10), EU Commission, UCITSD 2010/43/EU, July 2010.

  139. 139.

    Zetzsche, The Alternative Investment Fund Managers Directive, 2012, 330.

  140. 140.

    FSB, Proposed Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities, June 2016, 28.

  141. 141.

    Zetzsche, The Alternative Investment Fund Managers Directive, 2012, 331.

  142. 142.

    ESMA, AIFMD Final Report, November 2011, 53ff.

  143. 143.

    FSB, Proposed Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities, June 2016, 22.

  144. 144.

    FSB, Proposed Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities, June 2016, 22.

  145. 145.

    Bank of Ireland, Loan Origination by Investment Funds, Discussion Paper, 2013, 22.

  146. 146.

    FSB, Proposed Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities, June 2016, 22.

  147. 147.

    Bank of Ireland, Loan Origination by Investment Funds, Discussion Paper, 2013, 22.

  148. 148.

    FSB, Proposed Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities, June 2016, 24.

  149. 149.

    Bank of Ireland, Loan Origination by Investment Funds, Discussion Paper, 2013, 11 and 22; FSB, Proposed Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities, June 2016, 10.

  150. 150.

    “Consultation on Shadow Banking - European Commission,” http://ec.europa.eu/finance/consultations/2012/shadow/index_en.htm (accessed 3 September 2017).

  151. 151.

    Bank of Ireland, Loan Origination by Investment Funds, Discussion Paper, 2013, 11 and 22; FSB, Proposed Policy Recommendations to Address Structural Vulnerabilities from Asset Management Activities, June 2016, 10.

  152. 152.

    Zetzsche, The Alternative Investment Fund Managers Directive, 2012, 328.

  153. 153.

    Bank of Ireland, Loan Origination by Investment Funds, Discussion Paper, 2013, 23.

  154. 154.

    IOSCO, Risk Concentrations Principles, December 1999, 2.

  155. 155.

    Bank of Ireland, Loan Origination by Investment Funds, Discussion Paper, 2013, 21.

  156. 156.

    Bank of Ireland, Loan Origination by Investment Funds, Discussion Paper, 2013, 22.

  157. 157.

    Chambers et al., Alternative Investments, 18.

  158. 158.

    “Consultation on Shadow Banking - European Commission”.

References

Download references

Author information

Authors and Affiliations

  1. Luxembourg, Luxembourg

    Promitheas Peridis

Authors
  1. Promitheas Peridis
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Promitheas Peridis .

Rights and permissions

Reprints and permissions

Copyright information

© 2022 The Author(s), under exclusive license to Springer Nature Switzerland AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Peridis, P. (2022). Lending and Its Risks: A Comparison Between Banks and Alternative Investment Funds. In: Alternative Lending. EBI Studies in Banking and Capital Markets Law. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-13471-5_4

Download citation

  • DOI: https://doi.org/10.1007/978-3-031-13471-5_4

  • Published:

  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-031-13470-8

  • Online ISBN: 978-3-031-13471-5

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation