We are excited to bring to your attention a significant development in AIFMD 2.0 with the introduction of a new provision for depositaries. This update will shed some light on the conditions that must be fulfilled when the depositary delivers its services while being based in a different EU state than the AIF.
The AIFMD 2.0 introduces the possibility for depositaries to provide their services from a different EU Member state than the one where the AIF is located. Namely, its newly introduced Article 21(5a) allows the Member States’ national competent authorities (“NCA”) to permit the appointment of depositaries established in a different Member State.
Conditions for approval
- “The AIF manager must submit a detailed and justified request to the NCA, showing a clear need for appointing a depositary from another Member State due to inadequate local services that fail to align with the AIF's investment strategy.
The aggregate amount in the national depositary market of the home Member State of the AIF of assets entrusted for safekeeping does not exceed EUR 50 billion or the equivalent in any other currency.”
The latter condition is to be understood that if the EU AIFM managing an EU AIF cannot appoint a depositary from the EU AIF home Member State because of the Home Member State’s depositary market scarcity, then the AIFM can appoint a depositary from another EU jurisdiction if the total assets safekept in the AIF’s home Member State depositary market do not exceed EUR 50 billion or its equivalence.
Case by case assessment
It is important to note that approval for such appointments is not automatic. Each request is scrutinized based on the "principle of necessity". As such, the NCA carries out a case-by-case assessment on the lack of relevant depositary services in the home Member State of the AIF – all while having regard to the investment strategy of that AIF – in order to assess whether such an appointment is reasonably justified.
As a matter of example, it can be noticed that some markets have a lack of competitive supply of depositary services, leading to increased costs and inability to effectively meet the needs of the AIF in regard to its investment strategy.
Therefore, this amendment will significantly impact smaller jurisdictions such as Malta for instance where the depositary market is relatively small.
Implications for your investments
This development may lead to more competitive pricing and enhanced service offerings in the depositary market, particularly in regions where there is currently a limited supply of such services. However, the stringent conditions and the necessity of individual assessments mean that the practical application of this new provision will be selective and tailored to specific needs.
Looking ahead
While AIFMD 2.0 does not allow for depositary passporting contrary to the expectations of the amendments, it opens new avenues for strategic partnerships and operational flexibility within the EU. We will continue to monitor these changes closely and are prepared to assist you in navigating these new options.
For further details on how this might affect your specific situation, or to inquire about depositary services for Luxembourg-based AIFs, please do not hesitate to reach out to Isabel Høg-Jensen directly.
Stay tuned for more insights in our upcoming Connecting Synergies Series!
Issued by BSP Nordic Desk
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