On 2 October 2025, bill of law n°8627 (the “Bill of Law”) implementing i.a Directive (EU) 2024/1619 of the European Parliament and of the Council amending Directive 2013/36/EU as regards supervisory powers, sanctions, third country branches, and environmental, social and governance (“ESG”) risks (the Capital Requirement Directive, “CRD VI”) into Luxembourg law was submitted to Parliament.
Key developments
The Bill of Law, which will mainly amend our law of 5 April 1993 on the financial sector, as amended (the “LFS”), notably tackles four key areas for the banking sector:
- Material transactions
The Bill of Law will introduce new rules in the LFS regarding “material transactions” contemplated by credit institutions or (mixed) financial holding companies, with the objective of ensuring the prudential soundness of those entities.
“Material transactions” encompass the acquisition or disposal of material holdings, material transfers of assets and liabilities, and mergers of scissions involving such entities.
These new rules notably pertain to i.a. the prior notification to the CSSF and/or assessment of such transactions by obliged entities where they are likely to have a material impact on the prudential situation of the proposed acquirer.
- Integration of ESG risks
The Bill of Law will implement new rules requiring banks and certain investment firms to take ESG risks into consideration in their internal governance arrangements, strategies and risk management policies, under the prudential supervision of the CSSF.
- Internal governance
The Bill of Law brings clarifications on the “fit and proper” assessment performed by banks and certain investment firms.
New provisions will notably be added in the LFS to clarify and harmonise the rules applicable to the “fit and proper” assessment of (i) members of the management body and (ii) key function holders.
The Bill of Law will further require obliged entities to clearly identify and determine the duties and responsibilities of each individual.
- Cross-border provision of banking services into Luxembourg by third-country firms
A significant change brought by the Bill of Law is the introduction of a new regime applicable to the provision of core banking services into Luxembourg by third-country firms, on which we further focus below.
Focus on the new regime applicable to third-country firms
The Bill of Law clarifies under which circumstances third-country firms providing banking services in Luxembourg are required to establish a Luxembourg branch.
- Principle: obligation to establish a branch in Luxembourg
The obligation to establish a Luxembourg branch will depend on the (i) the scope of banking services provided and (ii) the legal status of the third-country service provider.
More specifically:
- the provision of deposit-taking activities covered by the banking monopoly (i.e. acceptance of deposits and other repayable funds) in Luxembourg by a third-country firm will be subject to the obligation to establish a branch, regardless of the legal status of the service provider;
- the activity of granting loans or giving guarantees/commitments in Luxembourg will trigger the obligation to establish a Luxembourg branch but only where the service provider is a third-country firm which would be considered as a credit institution or would meet the criteria of Article 4(1)(1)(b) of Regulation (EU) No 575/2013, as amended (“CRR”) if it were established in the EU.
In addition to the above, to trigger the above requirements, the relevant services need to be provided in Luxembourg. In this respect, the identification of Luxembourg as the place where the service is actually provided presupposes that the characteristic service is performed in Luxembourg. It will thus need to be assessed, for each service, whether it is considered as being performed in Luxembourg.
- Exemptions
The Bill of Law further sets out certain exemptions to the above obligation to establish a Luxembourg branch, which are similar to the rules set out under Directive (EU) 2014/65 on markets in financial instruments (“MiFID II”).
(i) Provision of banking services on an ancillary basis to MiFID II services
Third-country firms falling within the scope of the obligation to establish a branch in Luxembourg will be exempted from this requirement if the relevant banking services (as listed above) are provided strictly on an ancillary basis to an investment service or activity or ancillary service, as listed under Annex II of the LFS.
In other words, third-country firms may provide or continue to provide the aforementioned banking services in Luxembourg on a cross-border basis, provided that these are ancillary to the provision of an investment service or activity or ancillary service (and subject to compliance with the regime applicable to the provision of investment services/activities).
This exemption must be assessed on a case-by-case basis.
(ii) Reverse solicitation
Similarly to MiFID II, the Bill of Law introduces an exemption to the obligation to establish a Luxembourg branch where the banking service is provided at the own initiative of the client.
It results from the Bill of Law that the concept of “reverse solicitation” will need to be interpreted strictly and assessed on a case-by-case basis.
(iii) Inter-bank transactions
The provision of banking services by a third-country firm to a Luxembourg-based credit institution will also be exempted from the obligation to establish a branch in Luxembourg.
(iv) Intra-group transactions
The Bill of Law also provides for an intra-group exemption, whereby the provision of banking services by a third-country firm to an entity that is part of its group is not subject to the obligation to establish a Luxembourg branch.
- Authorisation and supervision of third-country branches established in Luxembourg
The Bill of Law introduces a harmonised system for the authorisation and supervision of third-country branches, which, however, depends on the categorisation of each third-country branch based on its importance to the financial stability of the European Union and its Member States.
The third-country branches authorisation regime should be applicable as from 11 January 2027.
The Bill of Law will enter into force 4 days after its publication in the Official Journal of the Grand-Duchy of Luxembourg.
Next steps
The Bill of Law is still at a very early stage and remains subject to comments and further amendments to be made throughout the legislative procedure, which we will closely follow.
That said, non-EU entities providing or contemplating to provide banking services in Luxembourg may already prepare by assessing whether it would be subject to the introduction to establish a branch in Luxembourg.
Please feel free to have a look at our CMS transposition tracker available on RegZone and LawNow.
Should you require our assistance to perform this prior analysis or have any questions on the above, please do not hesitate to contact one of our experts in the regulatory team.
