Banking Regulation - Form And Structure

2.1 What types of banks are typically found in your jurisdiction?

The Law of 5 April 1993 on the financial sector, as amended ('Banking Act') covers two types of banks: universal banks and banks issuing mortgage bonds.

As of 2 January 2020, the Luxembourg banking sector was composed of 129 banks, including:

83 universal banks; two banks issuing mortgage bonds; 13 branches of third country credit institutions; and 31 branches of credit institutions established in the European Union. Corporate banking, private banking, investment funds servicing and custody are the main business areas for banks in Luxembourg.

2.2 How are these banks typically structured?

A Luxembourg credit institution must be a legal entity incorporated under Luxembourg law in the form of a public law institution, a public limited liability company, a corporate partnership limited by shares or a cooperative society.

2.3 Are there any restrictions on foreign ownership of banks?

There are no restrictions on the foreign ownership of banks. To the extent that a foreign entity acquires or disposes of a Luxembourg bank, the provisions on acquisitions and disposals of qualifying holdings (see question 9) apply.

2.4 Can banks with a foreign headquarters operate in your jurisdiction on the basis of their foreign licence?

It is possible for banks established in a foreign jurisdiction to operate in Luxembourg. However, a distinction is made between banks established in an EU member state and banks established in a jurisdiction outside of the European Union (a third country).

Banks established in an EU member state: Credit institutions established and authorised in another EU member state may operate in Luxembourg via cross-border provision of services, via the establishment of a branch in Luxembourg or via the use of a tied agent, to the extent that the activities to be exercised in Luxembourg are covered by their licence and are listed in Annex I or Sections A or C of Annex II of the Banking Act (see question 3.1). In this case no authorisation from the Luxembourg authorities is required and the European passporting regime applies. Financial institutions as defined under Article 4(1)(26) of the Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms, as amended may also operate in Luxembourg, subject to a number of specific conditions.

Banks established in a third country: Third...