CSSF clarifies scope of lending

In response to questions from market players, the CSSF has clarified what it considers to be “lending to the public” within the meaning of the Financial Sector Law. This is helpful guidance for those involved in lending activities, whether locally or on a cross-border basis and clarifies the perimeters of the license requirements. It has long been known that lending to the public is a regulated activity under Luxembourg law and requires a license but there has been no clear legal definition of “the public”. In light of absence of clarity market practice became to request a so-called negative clearance from the CSSF for specific activities.

The CSSF has now updated its FAQ to clarify this and confirm that, the CSSF considers that a lending activity is not directed to “the public” where:

• Loans are granted to a limited circle of previously determined persons; or
• the nominal value of a loan amounts to EUR 3,000,000 at least (or the equivalent amount in another currency) and the loans are granted exclusively to professionals (as defined in the Consumer Code).

Whilst the first element was already well embedded in the Luxembourg practice and well-known by market participants, the second limb with a precise figure provides for significant improvement to the interpretation of the legal regime.

There may of course still be numerous cases where the notion of public can be interpreted and the CSSF will continue to assess this on a case by case basis. Nevertheless with this clarification from the CSSF the market now has more comfort on this point and will certainly be able to carry out their business more smoothly.