CRD VI: consequences on non-EU banking institutions lending money to Luxembourg entities

On 2 October 2025, the draft law 8627 amending the Financial Sector Law (the LSF) and transposing Directive (EU) 2024/1619 amending Directive 2013/36/EU (the CRD VI), Directive (EU) 2024/2994 and Regulation (EU) 2024/2987 (the Bill) has been published.

1  Key takeaways

The Bill aims to strengthen the resilience of the Luxembourg banking system, providing the following main features:

• Strengthening of consideration and evaluation of risks, particularly ESG and crypto asset-related risks;
• Strengthening of the assessment of the competence of managing bodies;
• Granting of enhanced sanction powers to the CSSF;
• Introducing of a new regime for material operations relating to credit institutions, financial service providers and (mixed) financial holding companies (e.g. transfers, buyouts, mergers, splits, etc.); and
• Creating of a new regime for non-EU companies wishing to provide banking services in Luxembourg.

2  Focus on the new regime for non-EU companies providing lending services to Luxembourg entities

The Bill requires non-EU companies:

• which accept deposits and other repayable funds in Luxembourg; or
• which, if they were established in the European Union (EU), would be considered as credit institutions within the meaning of Regulation (EU) No. 575/2013 and grant (i) lending, including, inter alia, consumer credit, mortgage credit, factoring, with or without recourse, financing of commercial transactions (including forfeiting) or (ii) guarantees and commitments in Luxembourg,

to establish an authorised branch in Luxembourg in order to carry out the above-mentioned activities.

The above requirements will only be applicable if the relevant services are considered to be provided in Luxembourg. This will be the case if the characteristic service is performed in Luxembourg. This shall be assessed on a case-by-cases for each service. Non-EU entities which do not qualify as credit institutions providing lending or guaranteeing services in Luxembourg are not subject to the requirement to establish a branch in Luxembourg. Therefore, non-banking entities located in third country, such as investment funds or any other non-bank company, will be allowed to grant loans or guarantees to Luxembourg entities on a cross-border basis with no requirement to establish a branch..

Non-EU companies providing investment activities and services (as listed in Annex II, Section A and C of the LSF) and any accommodating ancillary services, such as related deposit taking or the granting of credit or loans the purpose of which is to provide investment services (as listed in Annex II, Section A and C of the LSF) shall not fall within the above mentioned requirements.

3  Exemptions to the Luxembourg branch requirement

Several exemptions apply to the requirement of a Luxembourg branch:

Reverse solicitation: are exempt situations where the depositing, lending and/or guaranteeing services are provided by a non-EU company following an unsolicited request from a client (i.e. at the client's own initiative) located in the European Union.

The Bill explicitly excludes from such exemption situations where the non-EU company solicits the client through an entity acting on its own behalf or having close links with such non-EU company.

An initiative by a client or counterparty shall not entitle the non-EU company to market other categories of products, activities or services than those that the client or counterparty had solicited, unless these necessary for, or closely related to the provision of the service.

Interbank and intra-group transactions: transactions between credit institutions or between companies belonging to the same non-EU group are exempt.

Ancillary investment services: where banking services are provided on an ancillary basis in connection with investment services covered by Annex II, Section A and C of the LSF, the obligation to establish a branch does not apply.

Contracts concluded before 11 July 2026: contracts concluded by non-EU companies providing depositing, lending and/or guaranteeing services to customers before 11 July 2026 remain valid, and the continuation or execution of these contracts does not require the third-country service provider to have a branch in Luxembourg. This measure aims to preserve clients’ acquired rights under existing contracts and to facilitate the transition to implementation of this new regime.

With regard to agreements concluded before 11 July 2026, the Bill specifies that the terms and conditions of execution of such agreement would be covered by a derogation and do not trigger the obligation to establish a branch, even if execution occurs after 11 July 2026.

4  What's next?

The Bill is still being reviewed by the Luxembourg parliament. Following its review, it is likely that the Bill will be further be amended. The final version of the text should be adopted in the near future, since 10 January 2026 is the deadline for the transposition of CRD VI.