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CSSF guidance clarifies what is meant by lending to the public

  • Luxembourg
  • Financial services and markets regulation
  • Investment funds and asset management
  • Financial services

08-07-2021

On 15 June 2021, the Luxembourg Financial Supervisory Authority (the “CSSF”) published a new version of its Questions and answers on the status of financial sector professionals (Part II) (the “Q&A”).  The updated Q&A clarifies matters in relation to regulated lending activity and the interpretation of the concept of lending to the public.  What activity constitutes lending to the public is of particular interest to the non-bank lenders and private debt funds which engage in loan origination. 

Legal framework

Under article 28-4 of the Luxembourg financial services law of 1993 (the “1993 Law”) professionals engaged in the business of granting loans to the public require CSSF authorisation.  Only to legal persons with share capital greater than EUR 730.000 are eligible for authorisation for undertaking lending activity.  Unfortunately, the 1993 Law does not define the concept of “granting of loans to public”, and so each lender’s activity must be assessed on case by case basis.

Lending to the public

In the latest update of the Q&A, the CSSF provides greater certainty as to the interpretation of Article 28-4 and the situations where lending activity is not to be considered as provided to public.  Lending which does not constitute lending to the public includes:

  • loans which are granted to a limited circle of predetermined persons.  This includes loans granted through a Luxembourg-based special purpose vehicle to persons who have been pre-selected by the entity owning 100% of that vehicle;
  • loans with a nominal value of at least EUR 3,000,000 (or the equivalent amount in another currency) which are exclusively granted to professionals defined in Article L. 010-1.2 of the Luxembourg Consumer Code, being any natural person or legal person, whether privately or publicly owned, which is borrowing for purposes relating to its commercial, industrial, or independent professional activity.

Pre-clearance by the CSSF

If a professional is considering lending activity which does not fall into the exceptions to Article 28-4 of the 1993 Law set out in the Q&A, that person may submit a detailed description of the activities they would like to undertake to the CSSF, which will provide a determination of whether or not authorisation is required.

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