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AML & Financial Services Regulatory

Luxembourg: Regulatory clarification on loan origination activities

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In brief

On 15 June 2021, the Commission de Surveillance du Secteur Financier (CSSF) published an updated version of its Q&A on the statuses of PFS-Part II with respect to the granting of loans to the public.

Key changes

  • The status of professional performing lending operations which consists of granting loans, for their own account, to the public, is governed by Article 28-4 of the law of 5 April 1993 on the financial sector, as amended (LFS) and requires a CSSF’s authorization. However, the LFS does not provide a definition of the term “public.”
  • In its update, the CSSF clarifies that a lending activity is not directed towards the public and does not fall within the scope of Article 28-4 of the LFS where the nominal value of the loan amounts to EUR 3 million at least (or the equivalent amount in another currency) and the loans are granted exclusively to professionals as defined in Article L. 010-1.2 of the Consumer Code.
  • It must be noted that a CSSF’s authorization is also not required where loans are granted to a limited circle of persons who have been determined previously. The same applies where loans are granted through a Luxembourg special purpose vehicle (SPV) and granted to a limited circle of persons who have been determined previously by the entity that holds 100% of the SPV or controls it. 
  •  In all other cases, the CSSF indicates that they will carry out an assessment on a case-by-case basis.

This clarification is welcome by the credit fund sponsor community when they use Luxembourg SPVs for their lending activity.

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Author

Laurent Fessmann is co-head of the Banking & Finance practice of Baker McKenzie's Luxembourg office. He has more than 25 years experience in business law and started his career in 1996 as in-house counsel in a French CAC40 listed company, where he worked intensively on LBO transactions, capital markets and corporate law matters. He founded his own firm in August 2009 and established the Baker McKenzie Luxembourg office one year later.

Author

Catherine Martougin is a partner in the Funds & Asset Management team of the Baker McKenzie Luxembourg office. She has more than 25 years' experience in business law. Prior to joining the Firm, she practiced in elite international law firms in Paris and a leading Luxembourg law firm.

Author

Jean-François Trapp is a partner in the Real Estate team of the Baker McKenzie Luxembourg office. He has more than 20 years' experience in Luxembourg law. Prior to joining the Firm, he was a partner in a Luxembourg law firm where he headed the Real Estate department and co-led the Banking & Finance department. In 2007, he co-founded the Luxembourg law firm Roemers Trapp Pautot, a niche firm focusing on the real estate, real assets and infrastructure sectors.

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