Authorisation procedure and legal requirements

The authorisation procedure and the legal requirements relating thereto are set out in Articles 3 to 10 of the law of 5 April 1993 on the financial sector. Circular CSSF 12/552 specifies the implementing procedures as regards central administration, internal governance and risk management.

 

 

Legal requirements

Legal form

The legal person governed by Luxembourg law may only be incorporated as a public-law institution, a société anonyme (public limited company), a société en commandite par actions (limited partnership with a share capital) or a société coopérative (cooperative society). 

Central administration and infrastructure

The central administration shall be established in Luxembourg and shall have robust internal governance arrangements, effective risk management processes, adequate internal control mechanisms, sound administrative and accounting procedures, remuneration policies and practices allowing and promoting a sound and effective risk management as well as control and security arrangements for information processing systems. Moreover, the oganisational requirements provided by the MiFID shall be met (Article 37-1 of the law of 3 April 1993 on the financial sector).

Capital base

Authorisation shall be conditional on the production of evidence showing the existence of a share capital of 8,700,000 euros which is subscribed, fully paid-up and compliant with the conditions laid down in Article 28, or, where applicable, Article 29 of Regulation (EU) No 575/2013.

Managing body

The managing body shall be composed of at least two members. The dirigeants (managers) must be authorised to effectively determine the direction of the company and must have already acquired an adequate level of professional experience through the performance of similar activities at a senior level in terms of responsibility and independence. Moreover, the authorisation process of the key function holders provided for in item 17 of Circular CSSF 12/552 (referring to the EBA guidelines of 22 November 2012) should be observed.

Shareholdings

The shareholders or members, whether direct or indirect, whether natural or legal persons, that have qualifying holdings in a bank (holding 10% or more of the capital or of the voting rights or exercising a significant influence over the management of that undertaking) shall be authorised. Authorisation shall be refused if the suitability of the shareholders is not likely to ensure a sound and prudent management of the bank's business; a sound and prudent management is assess on the basis of the the following elements:

  • the professional standing and experience of the shareholders;
  • the financial soundness of the shareholders;
  • the adequacy of the structure of the group to which the bank belongs in order to supervise effectively and to ensure a clear division of responsibilities between the competent authorities;
  • the existence of suspected money laundering or terrorist financing.

Professional standing, knowledge, competences and experience

Authorisation must be conditional on the production by the members of the bodies performing administrative, management and supervisory functions, and by the shareholders or members, of evidence of their professional standing and must have the required knowledge, competences and experience to exercise their function. Such standing is assessed on the basis of police records and of any evidence tending to show that the persons concerned are of good standing and offer every guarantee of irreproachable conduct on the part of those persons.

 

Any change in the above-mentioned persons is to be communicated in advance to the CSSF. The CSSF may request all such information as may be necessary regarding the persons who may be required to fulfil the legal requirements with respect to reputation, knowledge, competences and professional experience. 

 

Granting the authorisation implies that the members of the bodies performing administrative, management and supervisory functions shall, on their own volition, notify in writing and in a complete, coherent and comprehensible form, to the CSSF any changes regarding the substantial information on which the CSSF based its investigation of the application for authorisation.

Governance and remuneration policy

The governance and remuneration policy arrangements of the new Chapter 4a (Article 38) of the law of 5 April 1993 on the financial sector, in particular the limits as regards multiple directorships, must be complied with.

External auditing

Authorisation shall be conditional on the institution having its annual accounts audited by one or more réviseurs d'entreprises agréés (approved statutory auditors) who provide proof of adequate professional experience.

Deposit guarantee and investor compensation

Authorisation shall be subject to the credit institution's membership in the Fonds de Garantie des Dépôts Luxembourg and in the Système d’Indemnisation des Investisseurs Luxembourg (Investor Compensation Scheme Luxembourg).

Procedure to be followed

Authorisation procedure

The authorisation is granted by the Minister responsible for the CSSF and after verification by the CSSF of compliance with the access conditions.

 

The application for authorisation must be accompanied by all such information as may be needed for the assessment thereof and by a programme of operations indicating the type and volume of business envisaged and the administrative and accounting structure of the institution in question.

 

If the shareholders of the institution to be authorised are already established in another Member State and carry out a business activity of the financial sector in this Member State, the CSSF shall consult beforehand the competent authorities of this Member State.