Luxembourg On Track For CRD VI Transposition

The formal process of implementation of Directive (EU) 2024/1619 amending Directive 2013/36/EU ("CRD VI") began on 6 October 2025 with the publication of the bill of law n°8627 ("Bill") and its submission to Parliament. The Bill primarily amends the Luxembourg law of 5 April 1993 on the financial sector, as amended ("LFS") and transposes elements of the EMIR 3 package¹ concerning concentration risks from exposures to third-country central counterparties into Luxembourg law.

Key aspects

The Bill implements the central provisions of CRD VI in four key areas:

1. Internal governance The Bill introduces changes to the assessment of the suitability of members of the management body and key function holders and integrates ESG risks, concentration risks from exposures to third-country central counterparties and risks regarding exposures to crypto-assets in the governance arrangements, strategies, and policies². These aspects will also be incorporated into the CSSF's supervisory evaluation practices.
2. Regime for third-country firms ("TCFs") providing core banking services in Luxembourg on a cross-border basis³ The Bill subjects the provision of core-banking services by TCFs to requirements equivalent to those applicable to EU firms. Specifically, the Bill introduces a requirement for TCFs providing core banking services in Luxembourg to establish branches, referred to as third-country branches ("TCBs"), and grants the CSSF the power to require on a case-by-case basis, that a TCB be converted into a subsidiary.
3. Material transactions oversight The Bill introduces new requirements for notifying and assessing acquisitions, disposals of material holdings, asset transfers, mergers, or divisions that could impact prudential profiles of credit institutions and (mixed) financial holding companies. The CSSF is granted corresponding supervisory powers.
4. Sanctions The Bill provides that breaches of the newly introduced requirements will be subject to the CSSF's administrative sanctioning powers. The CSSF will now be equipped with a new enforcement tool and may impose periodic penalty payments (astreintes) to compel the termination of ongoing breaches.

Focus on key requirements to establish TBCs and related clarifications

The commentaries to the articles of the Bill clarify certain aspects regarding the scope of the new requirement for TCFs to establish TCBs when providing core banking services in Luxembourg.

1. Scope of core banking services and legal status of the service provider The Bill clarifies that the receipt of deposits or other repayable funds—services covered by the banking monopoly—triggers the TCB requirement, regardless of whether the provider is a credit institution or not. However, the core-banking services consisting of granting loans or giving guarantees require the establishment of a branch only if the TCF is considered a credit institution in the EU or would meet the criteria of Article 4(1)(1)(b) of Regulation (EU) No 575/2013, as amended ("CRR") if established in the EU. In other words, non-banking entities providing loans or giving guarantees, are not subject to the new branch requirement. It follows that entities that do not meet the criteria of Article 4(1)(1) of CRR may continue their activities in Luxembourg on a cross-border basis and without establishing a Luxembourg branch. It further follows that this exemption applies to the origination of loans by investment funds and other non-bank entities established in a third country. Thus, the applicability of the TCB requirement with respect to core-banking services, other than the receipt of deposits or other repayable funds, depends not only on the core-banking service that is provided but also on the legal status of the TCF.
2. Exemption of ancillary services to MiFID II services The Bill clarifies that TCFs are exempt from the TCB requirement if the relevant core-banking services (points 1, 2, or 6 of Annex I of the LFS) are provided only incidentally as part of, or ancillary to, an investment service (as listed in Annex II of the LFS). Consequently, the receipt of deposits is exempt if it is ancillary to a MiFID investment service. The same applies to the granting of credits, loans, or guarantees (including cash management) related to the custody, administration, and safekeeping of financial instruments. The exemption equally applies if a credit or loan is granted to an investor to enable a transaction on financial instruments, where the entity granting the credit or loan is involved by providing investment advice, brokerage, order execution, or underwriting services. However, the Bill notes that the scope of this exemption must be assessed on a case-by-case basis, requiring a case-by-case analysis of the facts.
3. Clarification on activities carried out in Luxembourg The Bill provides that the obligation to establish a TCB applies only to activities carried out "in Luxembourg." It is therefore necessary to determine whether a TCF provides or is deemed to provide a regulated service on the Luxembourg territory. The Bill refers to an interpretative note on banking services of the European Commission⁴, which clarifies that the place where a service is rendered, is determined by the "characteristic performance" of the service. Accordingly, Luxembourg is identified as the place of provision of a service if the characteristic performance of that service is located in Luxembourg. The Bill notes that if a banking activity is carried out entirely and exclusively remotely from a third country, with no relevant connection to Luxembourg, the service is likely to be classified as being provided outside Luxembourg.

Timing

The Bill positions Luxembourg to meet the 11 January 2026 transposition deadline, reinforcing the competitiveness of the Luxembourg banking sector. CRD VI allows for a deferred application of certain TCB provisions until 11 January 2027, providing a transitional period for compliance and enabling the CSSF to issue supplementary guidance in particular to support TCFs offering banking services in Luxembourg.

Footnotes

1 EMIR 3 package includes Directive (EU) 2024/2994 and Regulation (EU) 2024/2987 on central clearing enhancements

2 The CRD VI changes with respect to the integration of ESG risks in the governance arrangements have been described in more detail in our Newsflash dated 11 July 2024

3 As described in more detail in our Newsflash dated 27 March 2024

4 Commission interpretative Communication — Freedom to provide services and the interest of the general good in the Second Banking Directive (97/C 209/04)

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