Background
On 29 May 2020, the EBA published final guidelines (the “Guidelines”) on the granting and monitoring of loans, the aim of which was to ensure that entities granting loans have adequate procedures for granting and monitoring loans to prevent loans from ending up as non-performing loans ("NPLs"). On 22 December 2022, the CSSF published Circular 22/824 (the “Circular”) in order to inform that, in its capacity as national competent authority, it would apply the Guidelines. Consequently, the Guidelines became part of the CSSF’s administrative and regulatory practice. The Circular applies since 31 March 2023.
Please refer to our previous newsletter article for more information on the scope of the Guidelines.
CSSF FAQ
On 29 March 2024 the CSSF published Frequently Asked Questions (“FAQ”) in relation to the Circular in which the CSSF clarified how Lombard loans, being secured by a diversified and liquid collateral, should be considered under the provisions of the Circular. The CSSF set out criteria to be applied by institutions when granting Lombard loans in line with Part III of the Circular (in particular, paragraph 33). The CSSF furthermore confirmed that Lombard loans at origination benefit from the exception as set forth in paragraph 97 of the Guidelines, provided that they meet such criteria.
On 16 May 2024, the CSSF updated the FAQ to clarify its expectations regarding interest rate increase scenarios for a robust sensitivity analysis for all variable/revisable interest rate loan agreements financing retail residential immovable properties.
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