According to Article 28-4 of the LFS, professionals carrying on a lending activity to the public for their own account must be authorised as PFS by the CSSF.

In the absence of a legal definition of "public", the CSSF considered that the concept of “public” generally refers to a multitude of non-identifiable persons. Where loans are granted to a limited circle of previously determined persons, such loans are not granted to the public and no prior authorisation of the CSSF is needed.

Further existing scenarios where the CSSF considers that the lending activity falls outside of the scope are:

In the recent update of its Q&A[1], the CSSF has introduced an additional case where the lending activity would not be considered to be made to the public where:

1. the nominal value of the loan amounts to €3 million at least (or the equivalent amount in another currency); and
2. the loans are exclusively granted to professionals within the meaning of  Article L. 010-1.2 of the Luxembourg Consumer Code (Code de consommation), which defines a professional as any natural or legal person, whether public or private, who acts, including through another person acting in its name or on its behalf, for purposes falling within the scope of its commercial, industrial, artisanal or liberal activity.

Next steps

With this update, the CSSF has added more legal certainty as to the concept of lending to the public, which can trigger a license requirement by the CSSF.

This clarification is certainly welcomed for unregulated vehicles and private debt funds which do not benefit from a direct exemption from the LFS, such as for example securitisation vehicles.

Previously, the practice was to often get clearance from the CSSF on this matter, absent clearer guidance.

This can now be avoided for the new case and may render some direct lending scenarios easier and quicker to implement.

1           Questions and answers on the statuses of “PFS” - Part II – Version of 15 June 2021