LexGo

Luxembourg law on State guarantee for bank loans
21/04/2020

The Luxembourg Parliament recently adopted a new law establishing a guarantee regime in favour of the economy within the framework of the COVID-19 pandemic.

On 18 April 2020, the Luxembourg Parliament has adopted a new law establishing a guarantee regime in favour of the Luxembourg economy within the framework of the COVID-19 pandemic (the Guarantee Regime Law).

Pursuant to the Guarantee Regime Law, guarantees may be issued and managed by the Treasury of State which will be vested with the necessary legal power:

  • within the limit of an aggregate budget of EUR 2.5 billion;
  • on new loans granted by credit institutions between 18 March 2020 and 31 December 2020 having a maturity of maximum 6 years that will be guaranteed at 85% by the State and 15% by the participating credit institutions;
  • to Luxembourg companies, legal or natural persons that were viable before 18 March 2020 but that are facing temporary financial difficulties due to the COVID-19 crisis (excluding real estate and holding companies and companies that were in difficulty before 1st January 2020);
  • subject to the adoption a final decision from the European Commission declaring these guarantees compatible with the internal market and conditions fixed by an agreement with the credit institutions concerned; and
  • the maximum amount of eligible loans must not exceed 25% of the beneficiary entity's turnover for the year 2019 (or failing that, the last year available).
  • The benefiting borrower will have to pay a guarantee premium on the State guarantee that is a variable rate that will increase proportionally to the size of the company and the maturity of the loan.

Furthermore, the scheme is not mandatory for Luxembourg credit institutions that are required to enter into specific agreements with the State Treasury in case they want to participate to it. The participating credit institution will then have to notify each loan concerned by the State guarantee through an automated computer system in order to benefit from the guarantee.

The Guarantee Regime Law that has entered into force on 18 April 2020, shall facilitate the granting of loans by credit institutions to support the companies affected by the consequences of the COVID-19 outbreak, and prevent that temporary financial difficulties caused by the crisis impair the permanence of employment and economic activity.

Cathrine Foldberg Møller
Counsel

Leonor Rijpma
Associate

Louis-Maël Cogis
Partner

Related : Simmons & Simmons - Luxembourg

[+ http://www.simmons-simmons.com]


Click here to see the ad(s)
All articles Banking law

Lastest articles Banking law

New rules on material IT outsourcing in the financial sector
15/10/2021

Effective 15 October 2021, financial institutions must notify the CSSF of any planned outsourcing of material IT activitie...

Read more

Payments services and e-money | New delegated regulation
15/10/2021

On 28 September 2021, the Commission Delegated Regulation (EU) 2021/1722 of 18 June 2021 (the “Regulation”), s...

Payments services and e-money | New delegated regulation Read more

Performance fees: the CSSF digitalises data collection
12/10/2021

Investment fund managers must report to the CSSF on the performance fee models used by all Luxembourg UCITS and AIFs that ...

Performance fees: the CSSF digitalises data collection Read more

Public Country-by-Country Reporting Directive adopted by the EU Council
11/10/2021

On 28 September 2021, more than five years after it was first tabled, the so-called “public Country-by-Country Repor...

Read more

LexGO Network