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Shadow banking regime: assessment of investment funds

Shadow banking regime: assessment of investment funds To explain the shadow banking regime that will be enforced in the European Union by local regulators starting in January 2017.Design/methodology/approachRecognising the regulatory-induced difficulties in the process of identifying certain types of clients (investment funds) as shadow banking entities, this article provides a decision tree for the shadow banking classification process in order to aid the impacted institutions with the assessment of their clients. With this in mind, the article advises the impacted institutions on the specific steps that should be taken when assessing investment funds for shadow banking flags. Furthermore, the article provides insights into the information required to conduct the shadow banking classification process.FindingsThe regime requires the impacted institutions to assess their clients for shadow banking flags in order to impose limits on credit lines to clients classified as shadow banking entities. The US regulatory jurisdiction will be impacted over a longer term.Originality/valueThe recommendations in this article will be especially useful for investment funds to ensure that the relevant information is clearly stated in their prospectuses in order to avoid being classified as shadow banking entities. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Investment Compliance Emerald Publishing

Shadow banking regime: assessment of investment funds

Journal of Investment Compliance , Volume 18 (2): 10 – Jul 3, 2017

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Publisher
Emerald Publishing
Copyright
© 2017 Lukas Prorokowski.
ISSN
1528-5812
DOI
10.1108/joic-04-2017-0024
Publisher site
See Article on Publisher Site

Abstract

To explain the shadow banking regime that will be enforced in the European Union by local regulators starting in January 2017.Design/methodology/approachRecognising the regulatory-induced difficulties in the process of identifying certain types of clients (investment funds) as shadow banking entities, this article provides a decision tree for the shadow banking classification process in order to aid the impacted institutions with the assessment of their clients. With this in mind, the article advises the impacted institutions on the specific steps that should be taken when assessing investment funds for shadow banking flags. Furthermore, the article provides insights into the information required to conduct the shadow banking classification process.FindingsThe regime requires the impacted institutions to assess their clients for shadow banking flags in order to impose limits on credit lines to clients classified as shadow banking entities. The US regulatory jurisdiction will be impacted over a longer term.Originality/valueThe recommendations in this article will be especially useful for investment funds to ensure that the relevant information is clearly stated in their prospectuses in order to avoid being classified as shadow banking entities.

Journal

Journal of Investment ComplianceEmerald Publishing

Published: Jul 3, 2017

Keywords: Investment funds; Alternative Investment Fund Managers Directive (AIFMD); Shadow banking; European Banking Authority (EBA); Prospectus; Undertakings for Collective Investment in Transferable Securities (UCITS)

References