Banking Law in Luxembourg

Luxembourg is well-known for its developed financial system, which is why a great number of European and overseas banks have established their presence in the Grand Duchy. The main laws governing the banking sector in Luxembourg are:

• -          the 1993 Law on the Financial Sector;
• -          the Law of 17^th of June 1992 on the accounting standards for financial institutions;
• -          the Law of 31^st of May 1999 on the redomiciliation of foreign financial companies;
• -          the Regulation of 13^th of July 2007 on the organizational requirements and conduct of banking institutions.

The last law issued targeting banks in Luxembourg was published in 2015 and concerns the reorganization of banks in case of insolvency.

Our lawyers in Luxembourg can offer additional information on the Banking Law in the Grand Duchy.

Requirements to set up a bank in Luxembourg

According to the Luxembourg Banking Law, in order to open a bank in the Grand Duchy one must obtain approval from the Financial Regulator, which is also in charge with issuing the licenses for branch or representative offices of foreign banks seeking to set up operations here. The Law on the Financial Sector (LFS) also establishes that any bank must have at least two managers who will be in charge with the daily operations carried out by the institution.

The minimum share capital to open a bank in Luxembourg is 8.7 million euros of which 6.2 million must be paid upon the incorporation of the company.

Licensing of banks in Luxembourg

Under the banking legislation, banks can receive one of the following licenses in order to operate in Luxembourg:

• -          the universal banking license;
• -          the mortgage banking license.

These banks can provide the following services to both natural persons and companies:

• -          account services which imply the opening and management of bank accounts;
• -          cash management services;
• -          brokerage services;
• -          advisory services;
• -          capital investment services;
• -          financing services;
• -          custody services.

Most banks in Luxembourg also offer specialized services tailored to the needs of large investors. These services usually include securitization, retail and corporate banking services.

For complete information about opening a bank in Luxembourg, do not hesitate to contact our local law firm.