Alternative Lending: Risks, Supervision, and Resolution of Debt Funds

455 Pages·2022·11.653 MB·English

by  Promitheas Peridis

EBI STUDIES IN
BANKING AND CAPITAL MARKETS LAW
Alternative Lending
Risks, Supervision, and Resolution
of Debt Funds
Promitheas Peridis
EBI Studies in Banking and Capital Markets Law
Series Editors
Danny Busch, Financial Law Centre (FLC), Radboud University
Nijmegen, Nijmegen, The Netherlands
Christos V. Gortsos, National and Kapodistrian University of Athens,
Athens, Greece
Antonella Sciarrone Alibrandi, Università Cattolica del Sacro Cuore,
Milan, Milano, Italy
Editorial Board
(All members of the EBI Academic Board)
Dariusz Adamski, University of Wroclaw
Filippo Annunziata, Bocconi University
Jens-Hinrich Binder, University of Tübingen
William Blair, Queen Mary University of London
Concetta Brescia Morra, University of Roma Tre
Blanaid Clarke, Trinity College Dublin, Law School
Veerle Colaert, KU Leuven University
Guido Ferrarini, University of Genoa
Seraina Grünewald, Radboud University Nijmegen
Christos Hadjiemmanuil, University of Piraeus
Bart Joosen, Free University Amsterdam
Marco Lamandini, University of Bologna
Rosa Lastra, Queen Mary University of London
Edgar Löw, Frankfurt School of Finance & Management
Luis Morais, University of Lisbon, Law School
Peter O. Mülbert, University of Mainz
David Ramos Muñoz, University Carlos III of Madrid
Andre Prüm, University of Luxembourg
Juana Pulgar Ezquerra, Complutense University of Madrid
Georg Ringe, University of Hamburg
Rolf Sethe, University of Zürich
Michele Siri, University of Genoa
Eddy Wymeersch, University of Ghent
General Series Editors
(all members of the EBI Academic Board)
Danny Busch, Financial Law Centre (FLC), Radboud University Nijmegen,
Nijmegen, The Netherlands
Christos V. Gortsos, National and Kapodistrian University of Athens, Athens,
Greece
Antonella Sciarrone Alibrandi, Università Cattolica del Sacro Cuore, Milan, Italy
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Promitheas Peridis
Alternative Lending
Risks, Supervision, and Resolution of Debt Funds
Promitheas Peridis
Luxembourg, Luxembourg
ISSN 2730-9088 ISSN 2730-9096 (electronic)
EBI Studies in Banking and Capital Markets Law
ISBN 978-3-031-13470-8 ISBN 978-3-031-13471-5 (eBook)
https://doi.org/10.1007/978-3-031-13471-5
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For Vasilis, Paraskevi, and Vasilis
Foreword
Alternative Investment Funds
Alternative Investment Funds sounds like a Topic for a rather narrow
group of specialists.
This is also the case in part, if a treatise on this topic is to be robust
enough to stand the test of practice and reality. Author presents an anal-
ysis, both legal and economic, of the finest precision. Author is truly
expert down into the details, expert in theory and expert in practical
broad lines and details. This book is a sound treatise on the subject
matter. It is so valuable among many things because of its analysis of the
credit fund regimes of various EU jurisdictions, a review of the AIFMD 2
proposal, and the fact that the book can be used from both practitioners
and academics. This is, however, not where the book ends.
The European legislature sees Alternative Investment Funds as well
as a much more general instrument for Europe, its overall stability. The
European legislature sees Alternative Investment Funds indeed as a core
catalyst for an arena that has had the hugest (mostly detrimental) impact
for the second decade in Europe and that is linked to the global financial
crisis triggered in 2008 and developing into a Euro crisis as of 2010 or
2012. This arena is characterized, shorter term, by massive destruction
of capital, an enduring credit crunch crisis for the real economy, parallel
vii
viii FOREWORD
impacts on the growth of economies, highly increased rates of indebt-
edness namely in Eurozone Member States, some nearly collapsing, with
massive social destruction and largely burdening future generations. This
arena is also characterized, longer term and perhaps just as destructive,
by the need of an interest rate policy that has led to an impossibility
of normal household saving strategies for old age and later on also to
an impossibility to adequately react to inflation tendencies triggered by
external shocks. The European legislature sees Alternative Investment
Funds as a core catalyst in such arena because they constitute alterna-
tives to bank lending so dominant in Europe. They are seen as thus
countering enormous moral and economic problems of a “too-big-to-
fail” risk of large and systemically important banks. They are therefore
the indispensable second or third leg of a truly European Capital Market
Union.
This more macroeconomic view—with the core macro-stability
concern sketched out—reaches still further than this. Alternative Invest-
ment Funds are not only seen as the vehicle for diversifying the risks posed
by systemically important banks and their “too-big-to-fail” risks. Alterna-
tive Investment Funds are seen as well as the ideal vehicle for a design
of finance more adapted to a sustainable real economy, so-to-speak the
specialist tool aiming for enterprises focusing on more sustainable real
economy goals—now also nudging all real economy into such a direc-
tive. Increasingly, they constitute the vehicle searched for a large public
interested in more sustainable strategies in the real economy.
The work presented here is so strong because it serves both needs,
that of the specialist and that of the bird’s-eye view. It shows these overall
lines impressively and presents figures, how indeed in large areas, Alter-
native Investment Funds have almost completely replaced bank lending,
for instance in lending to SMEs and others. It shows how this volume has
grown over the years—now to represent an equivalent of bank lending.
This work is such a fine piece of robust analysis of the regime, strongly
discussing as well the comparison of risks and regulation on the side of
bank lending and AIF lending. This work, however, gives us well such a
fine overall view of what the impact of Alternative Investment Funds is
FOREWORD ix
on the overall economy and landscape financing—mostly stability related,
but to a certain extent as well sustainability related and related to the
social question.
May 2022 Stefan Grundmann
Humboldt University
Berlin, Germany
European University Institute
Florence, Italy
Contents
1 Introduction 1
References 7
Part I Alternative Lending and How to Regulate
2 Toward an EU Market-Based Financial System: The
Emergence of Credit Alternative Investment Funds 11
1 Introduction 11
2 Systemic Risk and AIFs’ Systemic Importance 14
2.1 Systemic Risk Definition 14
2.2 Transmission Channels of Systemic Risk
and AIFs. 18
2.3 So, What Were AIFs’ Role in the GFC and Can
They Become Systemically Important? 20
3 The Financial System in EU Today 23
4 Why Have Banks Become so Dominant in Europe? 26
4.1 The Public Support and the Prudential
Supervision 27
4.2 The Politics 29
4.3 Financial and Technological Innovation
in Banking Industry 31
5 New Market Conditions and the Emergence of Lending
AIFs 34
xi