CMVM Regulation on Credit Funds
Legal Alert No. 123- CMVM Regulation on Credit Funds
On 23 April, CMVM published Regulation no. 5/2020 (“the Regulation”), amending CMVM Regulation no. 3/2015, on Venture Capital, Social Entrepreneurship and Specialized Investment. The new Regulation follows the creation of the Alternative Undertakings for Specialized Investment in Credits (“Credit OIAE” – commonly known as “Credit Funds”), resulting from the changes introduced by Decree-Law No. 144/2019, of 23 September, in Law No. 18 / 2015, of March 4, approving the Legal Framework for Venture Capital, Social Entrepreneurship and Specialized Investment “RJCRESIE”.
The main change introduced by this Regulation concerns the definition of the framework under which the recently created Alternative Undertakings for Specialized Investment in Credits (“Credit OIAE” – commonly known as “Credit Funds”) may grant credit.
Among the established provisions are asset composition requirements for OIAE,
requirements for the composition of the board of directors of managing
companies, rules for diversifying exposures, for credit risk analysis,
evaluation, monitoring and control, for stress-testing, and regarding the relationship between credit OIAE and its borrowers, namely with regard to the provision of information. Also worth highlighting is (i) the need for the board of directors of managing companies who manage credit OIAE to include at least one member with proven experience in credit granting and credit risk assessment and management activities; (ii) the credit OIAE’s duty to, after twelve months of activity, have a sufficiently diversified credit portfolio, subject to a maximum limit of 20% of its total assets by entity or entities in a group relationship; as well as (iii) the prohibition for this entity to hold credits whose maturity exceeds its duration.
Additionally, the Regulation adds an Annex regarding the filling of authorization requests for venture capital fund management companies and venture capital investment companies, in order to align their framework with that of alternative fund management companies and credit securitization management companies.
CMVM Regulation no. 5/2020 awaits publication in the Official Portuguese Gazette. Until then, it may be consulted here.