Central Bank Clarification
The Central Bank of Ireland (the “Central Bank”) has confirmed that Qualifying Investor AIFs (“QIAIFs”), which are managed by either an Irish authorised AIFM or a non-Irish authorised EU AIFM, may be authorised as open-ended LO AIFs through its standard 24-hour authorisation process. This is a practical clarification for the market, confirming that no additional authorisation pathway is required for such structures.
Background
As we previously reported, on 21 October 2025, the European Securities and Markets Authority (“ESMA”) published its final report and draft regulatory technical standards (“RTS”) for open-ended loan-originating alternative investment funds (“AIFs”) under Directive (EU) 2024/927 (“AIFMD II”). The Central Bank has now issued welcome clarification on its approach to the authorisation of open-ended loan-originating AIFs (“LO AIFs”) in Ireland.
AIFMD II provides that an alternative investment fund manager (“AIFM”) must ensure that a LO AIF it manages is closed-ended. By way of derogation, a LO AIF may be open-ended where the AIFM can demonstrate to its home Member State competent authority that: (i) the LO AIF’s liquidity risk management system is compatible with its investment strategy and redemption policy; and (ii) the key elements of the open-ended LO AIF, including its strategy and dealing frequency, enable it to remain sufficiently liquid to meet redemption requests.
Central Bank Requirements
The Central Bank has indicated that it expects the requirements of the ESMA RTS to be adhered to in relation to the management of open-ended LO AIFs. Importantly, however, the Central Bank has confirmed that it does not propose to seek pre-submissions from, or to engage with, relevant AIFMs or LO AIFs at the point of authorisation in relation to proposals for such adherence. This removes a potential source of divergence for qualifying investor LO AIF structures and aligns with the standard QIAIF authorisation procedure.
The position differs for Retail Investor AIFs (“RIAIFs”). Where a RIAIF is to be established as an open-ended LO AIF, the Central Bank will engage with AIFMs on proposals for adherence to the requirements of the ESMA RTS as part of the authorisation process. This reflects the heightened investor protection considerations that apply in the retail context.
Overview of ESMA RTS
For those assessing their frameworks against the ESMA RTS requirements, the key provisions are summarised below.
Redemption policy: The redemption policy of an open-ended LO AIF must take into account factors including redemption frequency, investment policy and strategy, availability of liquid assets, credit quality of loans, and the length of the notice period offered to investors.
Liquidity management: An earlier proposal to require AIFMs to maintain a fixed target amount of liquid assets was removed following consultation feedback. Instead, AIFMs must structure LO AIFs to ensure sufficient liquidity is maintained to meet redemption requests. Respondents had emphasised that effective liquidity management in loan-originating funds is driven primarily by liquidity arising from the loans themselves, and that a fixed liquid asset requirement could adversely impact fund performance.
Liquidity stress testing: Liquidity stress tests must be conducted at least annually, rather than quarterly as originally proposed. Tests must cover both assets and liabilities, and scenarios must be conservative, encompassing low-probability, high-impact events that could affect the valuation and liquidity of loans. A higher testing frequency may be required where the characteristics of a particular LO AIF justify it.
Ongoing monitoring: AIFMs must monitor critical metrics on an ongoing basis, including portfolio concentration, cash flows, investor behaviour, loan repayment schedules, and early warning indicators of loan impairment. AIFMs must also continuously assess whether the liquidity management system remains compatible with the LO AIF’s investment strategy and redemption policy.
RTS Status
The draft ESMA RTS were submitted to the European Commission for adoption. However, the European Commission indicated in an October 2025 letter that the ESMA RTS have been included in its list of delayed non-essential Level 2 acts, meaning adoption is not expected before 1 October 2027 at the earliest.
Notwithstanding the delayed adoption timeline, the Central Bank’s helpful confirmation that it expects adherence to the ESMA RTS in the interim clarifies that relevant AIFMs should start engaging with those requirements now.
Updated Rulebook Published
Separately, on 29 July 2026, the Central Bank published a further updated version of its AIF Rulebook. It includes targeted amendments to align the AIF Rulebook with the Irish AIFMD II implementing regulations and, in particular, the treatment of QIAIFs with registered AIFMs and non-EU AIFMs. The changes include the insertion of references to the new AIFMD II loan origination provisions (Regulations 16(6)(d), 16(6A), 16(6B) and 17A of the AIFM Regulations), which apply to all QIAIFs managed by registered or non-EU AIFMs that originate loans and not just QIAIFs that are LO AIFs.
Next Steps
For further information on the authorisation process for open-ended LO AIFs or the AIF Rulebook, please contact your usual Arthur Cox contact.