Amendment of the CSSF FAQs
(re professionals of the financial sector granting loans to the public)
On 15 June 2021, the Commission de Surveillance du Secteur Financier (CSSF) updated its FAQs on the statuses of professionals of the financial sector (CSSF FAQs) with respect to, among other professionals of the financial sector, professionals granting, for their own account, loans to the public within the meaning of article 28-4 of the law dated 5 April 1993 on the financial sector (the LFS).
Why is it important and what has changed?
The update is important for companies who perform lending operations on a professional basis to the public, for their own account, in Luxembourg , to assess whether they would fall within the scope of application of the above provision and therefore need to obtain a license from the CSSF.
Prior to 15 June 2021, the CSSF FAQs mentioned, among others, that:
- Article 28-4 of the LFS does not apply to securitisation undertakings or professionals excluded from the scope of the LFS in accordance with article 1-1(2), including notably undertakings for collective investments (UCIs), specialized investment funds (SIFs), pension funds, sociétés d’investissement en capital à risque (SICARs) or any other persons carrying out an activity governed by special laws, irrespective as to whether these entities grant loans directly or through a Luxembourg SPV in which they hold at 100% or they directly or indirectly control (look-through approach);
- Article 28-4 requires there to be a “professional character” to the credit activity, meaning that it needs to be performed repetitively (unique or one-off credit operations are not governed by article 28-4 of the LFS);
- Article 28-4 of the LFS requires that loans are granted “to the public”, which concept generally refers to a multitude of non-identifiable persons. That is why the CSSF considers that, where loans are granted to a limited circle of previously determined persons, they are not granted to the public.
The CSSF has now given the following guidance in relation to the term “public”, by clarifying that a lending activity is not directed towards the public where:
- Loans are granted to a limited circle of previously determined persons; or
- (i) the nominal value of a loan amounts to EUR 3,000,000 at least (or the equivalent amount in another currency) and (ii) the loans are granted exclusively to professionals as defined in the Luxembourg Consumer Code (i.e. any natural or legal person, whether public or private, who acts, including through the intermediary of another person acting in his or her name or on his or her behalf, for purposes relating to his or her commercial, industrial, craft or professional activity).
What does this mean for companies performing lending operations in Luxembourg?
Where the activities cannot be excluded from the scope of article 28-4 of the LFS with certainty, the CSSF will carry out an assessment on a case-by-case basis. Persons contemplating granting or acquiring loans are invited to submit a detailed description to the CSSF of the activities envisaged, allowing the CSSF to determine whether the activities to be carried out require prior authorisation.