Granting loans: the AMF publishes the findings of its inspections of six asset management companies

The AMF has examined the organisation and lending practices of six asset managers. In its summary document, it identifies possible areas of improvement.

Since November 2016, management companies can grant loans through certain types of alternative investment funds (AIFs). To do so, they must have a specific programme of activity approved by the AMF that covers this loan granting activity. With 43 companies already authorised to carry out this activity, the regulator wanted to examine existing practices in order to support the players and secure the development of lending in the asset management industry.

Based on a series of short thematic (SPOT) inspections involving five asset management companies (AMCs) and a standard inspection of a sixth, the AMF focused its attention on the following points:

organisation of the asset management companies with respect to granting loans,
procedures related to this activity,
loan structuring arrangements,
financial management of the AIFs concerned,
control systems.

Overall, the AMCs inspected have put in place organisations, tools and processes for granting loans, which should enable them to achieve an appropriate level of compliance. The analyses identified good practices, for example regarding completeness of procedures, methodologies for analysing and monitoring loans, and formalisation. The AMF also identified a number of areas for improvement, such as the need to clarify certain procedures relating to credit analysis, collateral management and debt recovery, the need for diligences and monitoring in these areas, and the need to fully include this activity in the control system.

Since the asset management industry has only started to grant loans recently, the inspections performed covered a short period of time having regard to the duration of the loans granted. It is therefore likely that the reliability of the processes in place has not yet been fully tested. It is the responsibility of asset management companies to ensure that they reassess their systems on a continuous basis and adjust them as necessary.

About the AMF
The AMF is an independent public authority responsible for ensuring that savings invested in financial products are protected and that investors are provided with adequate information. The AMF also supervises the orderly operations of markets. Visit our website https://www.amf-france.org