CRD VI transposition: Clarifications and next steps for Luxembourg’s financial sector

Key clarifications in the bill

1. Exemption for ancillary services linked to MiFID II activities
The new Article 32-2 of the LSF introduces an exemption for services (points 1, 2 or 6 of Annex I) provided on an ancillary basis in connection with investment services under MiFID II.
This means that TCFs and their branches are not subject to the new TCB regime when these core services are ancillary to regulated investment activities.
For example, deposit-taking or credit granting performed as part of custody, cash management, or guarantee services fall within this exemption.
The ABBL welcomes this clarification as it provides regulatory certainty for custodian banks operating in Luxembourg.

2. Scope of core banking services and status of the service provider
The bill specifies that TCFs must establish a TCB only if they qualify as credit institutions under EU law or would meet the definition of Article 4(1)(1)(b) of the Capital Requirements Regulation (CRR) if established in the EU.
As a result, non-bank entities such as investment funds may continue to operate cross-border without establishing a Luxembourg branch, provided they do not meet CRR criteria.
This clarification confirms that the branch requirement depends both on the service provided and on the provider’s status.

3. Clarification of the territoriality principle
The obligation to establish a TCB applies only to activities carried out “in Luxembourg”, defined by the location of the service’s characteristic performance.
This means that in certain cases, a service may be considered as provided from outside Luxembourg even if the client is located within the country — an assessment that must be made on a documented, case-by-case basis.

Other key changes introduced by the bill

• Internal governance:
  Updates to governance structures, authorised management definitions, and suitability assessments for board members and key function holders.
  ESG risks, concentration risks and crypto-asset exposures are now integrated into governance frameworks — expected to be reflected in a revised CSSF Circular 12/552.
• Material transaction oversight:
  New notification and assessment requirements for acquisitions, disposals, mergers, and asset transfers that could affect the prudential profile of credit institutions or holding companies.
• Administrative sanctions:
  Breaches of the new provisions will fall under the CSSF’s sanctioning powers.