CRD VI: Luxembourg transposition law

The Law of 5 May 2026, which transposes Directive (EU) 2024/1619 amending Directive 2013/36/EU (“CRD VI”) into Luxembourg law, (“Law”) was published in the Luxembourg Official Journal and will enter into force on 10 May 2026.

This newsflash follows on from our October 2025 publication (“Luxembourg on track for CRD VI transposition”) with respect to the central provisions introduced by CRD VI and provides a practical update for non-EU third-country firms (“TCFs”) engaged in the provision of core banking services — most notably lending and guarantee issuance — within or into Luxembourg, and highlights those aspects of the Law most likely to warrant immediate consideration.

1. Legislative snapshot

The Law was submitted to Parliament on 2 October 2025. Since then, it has been reviewed by the Finance Commission, the European Central Bank (opinion dated 18 December 2025) and the Council of State (opinion dated 10 March 2026). Neither body required substantive changes: the text that passed the first constitutional vote is, in all material respects, the same as the Law as first published in October 2025.

Luxembourg has maintained its stated approach of “the directive and nothing but the directive” — transposing CRD VI faithfully, without gold-plating.

2. Third-country branch requirement

Core rule

New Articles 32-2 and 32-3 of the Luxembourg Law of 5 April 1993 on the financial sector, as amended (“LFS”) are the key provisions. They require TCFs that provide core banking services in Luxembourg to establish a locally authorised third-country branch (“TCB”), unless an exemption applies. The CSSF retains the power to require, on a case-by-case basis, that a TCB be converted into a subsidiary.

The core banking services caught by this requirement are: (i) acceptance of deposits and other repayable funds; (ii) lending in any form, including consumer credit, mortgage credit, factoring and financing of commercial transactions; and (iii) provision of guarantees and commitments.

Luxembourg has chosen not to exercise the option offered to the Member States by CRD VI to subject TCBs to the same requirements as fully licensed local credit institutions. The TCB regime is therefore intentionally calibrated to what CRD VI strictly requires.

Who is in scope?

Not all TCFs are subject to the TBC requirement in the same way. Its application depends on both the type of service being provided and the legal nature of the provider:

• Deposit-taking. Any TCF, regardless of its legal form or regulatory status in its home jurisdiction, triggers the TCB requirement if it accepts deposits or other repayable funds in Luxembourg.
• Lending and guarantees. The TCB requirement only applies if the TCF is — or would be, if established in the EU — a credit institution within the meaning of Article 4(1)(1) of Regulation (EU) No 575/2013 (“CRR”). Non-bank entities fall outside this requirement. As a matter of principle, non-EU unregulated lenders and non-EU alternative investment funds (AIFs) providing loans or issuing guarantees to Luxembourg counterparties are not caught by the TCB requirement and may continue to do so on a cross-border basis without establishing a Luxembourg presence. This preserves an important channel for fund finance and private credit activity.

Where is the service provided? The “characteristic performance” test

The TCB requirement applies to services provided “in Luxembourg”. The Law does not define this concept autonomously, but the parliamentary commentaries refer to the European Commission’s 1997 Interpretative Communication , which locates a service by reference to the “characteristic performance” of that service — assessed by reference to factors such as where the provider is established, where the customer is located, and where the contract is executed.

The parliamentary commentaries to the Law make it clear that where a banking activity is carried out entirely and exclusively on a remote basis from outside Luxembourg, with no relevant nexus to the territory, it is treated as performed outside Luxembourg. The TCB requirement is then not triggered, regardless of where the client is located.

However, whether a service is provided “in Luxembourg” is a fact-intensive analysis that must be conducted on a transaction-by-transaction basis and properly documented. 

3. Exemptions

Different exemptions from the TBC requirement are available, each requiring careful factual assessment and documentation.

• Reverse solicitation. Where a client approaches a TCF on its own exclusive initiative to request a core banking service, no TCB is required. The burden of proving that the service was truly unsolicited lies with the TCF — and the evidentiary threshold is high. It is therefore essential to maintain a robust paper trail. The resulting “follow-on” right (to provide services closely related to the original request) is narrow and does not extend to new service categories.
• Interbank transactions. Services provided by a TCF exclusively to another credit institution established in the EU are exempt.
• Intragroup transactions. Services provided by a TCF to entities within the same consolidated group are exempt.
• Ancillary services to MiFID II investment activities. Core banking services are exempt where they are provided solely on an ancillary basis in connection with MiFID II investment services. Practically, this covers: deposit-taking ancillary to an investment service or activity; and lending, guarantees, cash management and collateral management where the TCF is also providing safekeeping and administration of financial instruments. Each situation requires a case-by-case assessment.
• Grandfathering. Loan agreements and guarantees executed before 11 July 2026 are grandfathered and fall outside the TCB requirement. Extensions or renewals entered into after that date are unlikely to benefit from this protection.

4. Examples of practical scenarios which require individual analysis

• Co-borrowing arrangements. A Luxembourg subsidiary joins a facility from a non-EU bank to a non-EU parent company. TCB analysis applies at accession. Whether the service is provided in Luxembourg and if exemptions apply depends on the accession mechanics and factual nexus.
• Passive syndicate participation. Non-EU banks joining syndicates as passive participants may benefit from the interbank exemption if other members are EU credit institutions. If participation is managed entirely from outside Luxembourg, the service should not be considered as being provided in Luxembourg.
• Sponsor-driven Luxembourg vehicles. A non-EU private equity firm sets up a Luxembourg fund or SPV and arranges financing from a non-EU bank. TCB analysis applies to the lender, including if the lender is the EU branch of a non-EU bank.
• Secondary market transactions. Secondary activity in loans to Luxembourg borrowers raises distinct questions depending on how the transfer is structured.
• Grandfathering edge cases. A commitment letter signed before 11 July 2026, with the loan agreement executed afterwards, may or may not benefit from grandfathering depending on whether the commitment letter itself constitutes the relevant contractual relationship. Similarly, post-11 July 2026 amendments to a grandfathered loan — particularly those that increase exposure, extend tenor, or alter material economic terms — carry a risk of being treated as creating a new agreement and forfeiting the grandfathering benefit.

5. Key dates

• 11 July 2026. Grandfathering cut-off. Loans and guarantees signed before this date are protected. Post-cut-off extensions or renewals are unlikely to be covered.
• 11 January 2027. TCB provisions become fully applicable. 
• Forthcoming. The CSSF is expected to issue supplementary guidance on the application of the TCB regime.

With the 11 July 2026 grandfathering cut-off now less than a few weeks away, non-EU financial institutions that have not yet assessed the impact of CRD VI on their Luxembourg activities should do so as a matter of priority. This is particularly relevant for entities with existing commitments or upcoming transactions involving Luxembourg borrowers or vehicles, where the structure, timing and documentation of the relevant agreements may determine whether grandfathering applies.