ON 15 JUNE 2021, THE CSSF PUBLISHED AN UPDATED VERSION OF ITS Q&A ON THE SCOPE OF PERMITTED ACTIVITIES FOR PROFESSIONALS OF THE FINANCIAL SECTOR.
In it the CSSF clarified its interpretation of the concept of lending to the "public", an information relevant for the non-bank lending industry and, in particular, for private debt funds with a loan origination activity.
In general terms, the granting of loans to the public on a professional basis is a regulated activity which is subject to authorisation by the CSSF under Article 28-4 of the law of 5 April 1993 on the financial sector. However, the law does not provide a legal definition of the term "public" for this purpose.
By law, non-regulated private debt funds cannot benefit from an exception to the authorisation requirement. At the same time, direct lending strategies will typically not amount to granting loans to the "public". This is an assessment that had to be made on a case-by-case basis, as the regulator had only published limited formal guidance on this particular context to date.
What has been clarified
The update of the Q&A provides greater regulatory certainty on situations where the CSSF does not consider a lending activity to be directed towards the public. This is true where:
- loans are granted to a limited circle of previously determined persons; or
- the nominal value of each loan amounts to EUR 3,000,000 at least (or the equivalent amount in another currency) and the loans are granted exclusively to professionals.
For this purpose, a "professional" is defined as any natural person or any legal person, irrespective of whether privately or publicly owned, that is acting, including through any other person acting in its name or on its behalf, for purposes relating to its commercial or industrial activity, craft or profession.
The update further clarifies the Luxembourg legal framework for non-bank lending and confirms the country's position as an attractive domicile for private debt funds.
The update lends welcome clarity to Luxembourg's legal framework for non-bank lending and reaffirms the country's position as an attractive domicile for private debt funds.
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