Legal requirements and authorisation procedures for credit institutions

The authorisation procedures pertaining to the existence (licensing and withdrawal of license), shareholding (qualifying holding) and management (fit & proper or FAP) of credit institutions, and the legal requirements relating thereto, are set out in Articles 3 to 11 of the Law of 5 April 1993 on the financial sector (“LFS”). Beside the LFS, the principal regulations applicable for these subjects are:

• Circular CSSF 12/552 specifies the implementing procedures as regards central administration, internal governance and risk management;
• The prudential procedure for the appointment of the members of the management body and key function holders sets out the fit & proper (“FAP”) approval process;
• Circular CSSF 17/669 details the prudential assessment criteria of qualifying shareholders.

The European Central Bank (“ECB”) is exclusively competent for the granting and withdrawal of licenses and the approval of qualifying holdings in all credit institutions (except third-country branches), and the FAP approvals in significant credit institutions, established in the Member States participating in the Single Supervisory Mechanism (“SSM”). All such procedures shall be submitted via a dedicated ECB Portal. Application files submitted via this portal should preferably be drafted in English.

At the CSSF, these procedures are being handled by the division “Agréments” of the banking department (here below referred to as “CSSF”) at the exception of FAP procedures linked to less signification institution as explained in the section “Less significant credit institutions”.

The ECB is exclusively competent to authorise all credit institutions established in the Member States participating in the SSM. This competence is exercised in close cooperation with the CSSF.

Application files shall be submitted via a portal dedicated to authorisations set up by the ECB, the IMAS Portal. This portal can be accessed via the following link: IMAS Portal.

The core form in the IMAS Portal sets out the applicable information requirements. The form shall be completed in accordance with the relevant legal requirements and the ECB Licensing Guide. To avoid the automatic rejection of the application file because the 12-month legal deadline is exceeded, the CSSF recommends that the applicant (i) conducts preliminary discussions with the banking department prior to the submission of the application file and (ii) submits any application file first in draft or pre-filing format in the IMAS Portal.

Concerning members of the management body and key function holders, FAP applications should be submitted through the IMAS Portal within the IMAS Licensing application (tab “6. Effective direction and key function holders of the applicant credit institution”) and include all the documents requested in the prudential procedure for the appointment of members of the management body and key function holders in credit institutions, as explained in the below section (“Less significant credit institutions”).

The application for authorisation will be assessed by the CSSF and the ECB, verifying that the applicant complies with all the authorisation requirements. If the CSSF considers that the application file meets all the requirements, it provides a draft proposal to the ECB to grant the banking authorisation to the applicant. The Supervisory Board of the ECB submits the draft proposal to the Governing Council of the ECB for adoption. The authorisation is granted by the ECB and notified by the CSSF to the applicant.

If the CSSF considers that the file does not fulfil all the requirements, the CSSF informs the applicant of its decision to reject the application, indicating the possible remedies thereof.

The CSSF is competent for the authorisation of third country branches. The applicant therefore does not use the ECB IMAS Portal but submits its third country branch authorisation file to the CSSF via banking_license@cssf.lu.

As per Article 32 of the LFS, the information requirements are broadly similar to the ones applicable to credit institutions.

For further details on the licensing process, please contact the CSSF (banking_license@cssf.lu).

The ECB is exclusively competent to authorise all qualifying holdings in credit institutions established in the Member States participating in the SSM. It is to be noted that the present procedure covers participations taken by acquirers in Luxembourg credit institutions (the “Target”), as opposed to participations taken by Luxembourg credit institutions under Article 57 of the LFS.

The notification file shall be submitted via a portal dedicated to authorisations set up by the ECB, the IMAS Portal. This portal can be accessed via the following link: IMAS Portal.

Upon receipt of the formal notification, the CSSF acknowledges receipt of the notification and informs the acquirer whether the notification is complete in accordance with Article 6(7) of the LFS. In case the information is not complete, a list of missing information will be sent to the acquirer, in order to complete the notification.

The notification will be assessed within 60 working days by the CSSF and the ECB. The assessment period starts from the working day following the day of the acknowledgement of completeness of the notification.

The assessment period is calculated in accordance with the ECB’s calendar and the end of assessment period will be stated in the acknowledgement of completeness of the notification.

During the assessment period, the CSSF as well as the ECB, may request further information as deemed necessary in order to complete the assessment. Any such request, which shall be made no later than the fiftieth working day of the assessment period will suspend the assessment period until the requested information is provided, subject to the maximum suspension period prescribed by Article 6(8) of the LFS. Note that a concomitant financial holding company approval or exemption procedure can lead to a further suspension in accordance with Article 6(5a) of the LFS.

The ECB is exclusively competent to decide whether to oppose or not to oppose the proposed acquisitions of qualifying holdings. The CSSF will provide a proposed decision to the ECB based on its analysis of the assessment criteria. The authorisation decision is issued and notified by the ECB.

Information requirements for qualifying holding notifications can vary depending on the nature of each application file, such as the type of acquirer, percentage of holdings or voting rights acquired and the impact on the Target.

The core form in IMAS Portal sets out the applicable information requirements. The form shall be completed in accordance with the relevant legal requirements and Circular CSSF 17/669. In case the acquisition results in a change in the management bodies of the Target:

• Less significant credit institutions should submit FAP applications through the IMAS Portal within the IMAS Qualifying Holding application (tab “3. Information on the persons who will effectively direct the business of the target undertaking”). These applications shall be completed in accordance with the CSSF’s prudential procedure for the appointment of members of the management body and key function holders in credit institutions, as explained in the below section (1.3.2 Less significant credit institutions);
• Significant credit institutions (or target undertakings becoming significant following the proposed acquisition) should submit separate FAP applications through the IMAS Portal following instructions included in said portal (tab “3. Information on the persons who will effectively direct the business of the target undertaking”) as well as in the below section (“Significant credit institutions”).

Prior to the official submission of the notification, we recommend the proposed acquirers to engage in pre-notification discussions with the CSSF (banking_qualifyingholding@cssf.lu), in order to clarify expected information requirements, timeline and coordination for other potentially related procedures.

In the case of a less significant credit institution already authorised, the CSSF is exclusively competent to decide on the appointment of all the members of the management body.

Apart from FAP applications embedded within Licensing and Qualifying Holding procedures which are submitted through the IMAS portal, the CSSF’s ongoing supervision department is the point of contact for the introduction of all files. The files must include all the information and all the documents requested in the prudential procedure for the appointment of members of the management body and key function holders in credit institutions.

In accordance with the generally applicable deadlines for administrative decisions in Luxembourg, FAP approval decisions shall be communicated to the institution within three months of receipt of the complete application. If during the assessment period, additional information and/or missing documents are requested by the CSSF, the three-month deadline will only start to run once such additional information has been provided.

The ECB is exclusively competent for taking decisions on the appointment of all members of the management bodies of significant credit institutions which fall under its direct supervision.

The submission of FAP applications is exclusively done via the IMAS Portal, which can be accessed via the following link: IMAS Portal.

The dedicated IMAS Portal of the ECB should exclusively be used for new FAP applications regarding members of the management body, both in their management function (executives) and supervisory function (non-executives) of significant credit institutions.

In the following cases, the IMAS Portal should not be used:

• Notification of Key Function Holders (who are not expected to also become members of the management body)
• Notification of renewals (without any change in the executive or non-executive nature of the mandate)
• Communication of new material facts regarding appointees previously assessed and approved.

The ECB is exclusively competent to decide whether to oppose or not to oppose relevant FAP appointments in significant institutions. The CSSF assists the ECB in the assessment of the suitability of the appointee by drawing up a preliminary proposal, based on its analysis of the different fit and proper criteria. The authorisation decision is issued and notified by the ECB.  The same three-month deadline applies as set out in the above section “Less significant credit institutions”.

The ECB is exclusively competent for the withdrawals of banking licenses. This competence is exercised in close cooperation with the CSSF.

Applications for voluntary withdrawals shall be submitted via the IMAS Portal. This portal can be accessed via the following link: IMAS Portal.

The core form in IMAS Portal sets out the applicable information requirements.  The application for withdrawal will be assessed by the CSSF and the ECB, verifying that the applicant complies with all the withdrawal requirements as set out in the portal. The CSSF will provide a proposed decision to the ECB based on its analysis of said requirements. The withdrawal authorisation decision is issued and notified by the ECB. The same three-month deadline applies as set out in the section “Less significant credit institutions” above.

For further details, please contact the CSSF (banking_license@cssf.lu).

In Luxembourg, a cessation of the regulated activities due to a merger triggers a lapsing procedure for the purpose of article 79 of the SSM Framework Regulation. In case of lapsing of authorisation, a decision by the competent authority is not required as the license expires automatically on the occurrence of the merger.  Accordingly, instead of an ex-ante voluntary withdrawal application via the IMAS portal, the lapsing procedure merely requires an ex-post notification by the entity concerned to the CSSF (banking_license@cssf.lu), who will in turn notify the ECB.

The ECB will issue an ex-post lapsing acknowledgment letter.

Information requirements for lapsing notifications may vary depending on the nature of each application file. Generally speaking, the entity must provide the following information on the merger:

• A notification letter with the background of the merger, the effective date and the contact person and address (postal and/or digital) to which to send the lapsing acknowledgement letter,
• The board resolutions approving the merger,
• The shareholder resolutions, if applicable, approving the merger,
• The merger plan,
• The notary certificate,
• The RCS extracts.