Banking & Funds

Pursuant to Article 28-4 of the Luxembourg Financial Sector Act (FSA), an authorisation as a specialised professional of the financial sector (PFS) is required for professionals engaged in lending activity, i.e. the extension of loans to the public on their own behalf. This activity is different from that performed by credit institutions in that it does not involve the collection of deposits or other repayable funds from the public.

The reference to 'the public' implies that lending activities between entities belonging to the same group are not concerned.

In an earlier Q&A¹, the Commission de Surveillance du Secteur Financier (CSSF) indicated that the term 'public' generally refers to a group of non-identifiable persons and stated that the grant of loans to a limited circle of previously determined persons is not deemed lending to the public and therefore does not fall within the scope of Article 28-4 FSA.

In addition, the CSSF recently updated its Q&A to exclude from the scope of this provision lending activities where:

• the nominal value of the loan amounts to at least EUR 3,000,000 (or the equivalent in another currency); and
• the loan is granted exclusively to a professional, as defined in Article L. 010-1.2 of the Consumer Code, i.e. any natural or legal person acting (including through another person acting in his/her/its own name or on his/her/its own behalf) for purposes relating to his/her/its trade, business, craft or profession.

Neither Article 28-4 nor the FSA as a whole applies to professionals specifically excluded from the scope of this legislation, including UCIs, SIFs, pension funds, SICARs and other persons carrying out an activity the taking up and pursuit of which are governed by special legislation.

The CSSF's clarification will be welcome in practice, particularly by unregulated loan origination and loan participation funds, such as partnerships and RAIFs, that meet the abovementioned conditions and should therefore not be considered as performing lending activity under the FSA.

¹ Questions and answers on the statuses of "PFS" – Part II ("Q&A").