LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Hawa Mahamoud and Eva Jean, GSK Stockmann
1. Loan Market Overview 1.1 The Regulatory Environment and Economic Background
July 2025), including bank accounts and transfer- able securities. As a result, Luxembourg banks have been reducing their exposure to Russia and Ukraine in an attempt to limit the impact of the decline in the market valuation of their assets. In addition, in the realm of debt capital markets, issuers have amended the terms of issue documentation to account for the potential risks arising from geopolitical instability in the markets where they operate. These adjustments are designed to refine the assessment of market risks linked to securities, given the uncertain regional mac- roeconomic conditions. At the same time, the geopolitical instability seems to have exerted only a marginal influence on Luxem- bourg’s investment-fund sector, which has shown resilience amid the financial market disruptions. According to market data for Q1 2025, debt securi- ties and loans of non-financial corporations and the private non-financial sector have remained relatively stable since Q1 2022. Similarly, as of Q1 2025, debt securities issued by local corporations have also remained stable. 1.3 The High-Yield Market The Luxembourg Stock Exchange (LuxSE) is the leading European listing venue for high-yield bonds. Together with the European High Yield Association, the LuxSE published in 2006 the first EU guidance and rules on listing high-yield bonds, allowing corporate issuers with complex ownership structures access to capital markets. The LuxSE now holds a market share of 33% in terms of international bonds listed worldwide, according to figures disclosed in June 2025. A large number of such high-yield bonds are listed and admitted to trading on the multilateral trad- ing facility (Euro MTF) operated by the LuXSE. Being outside the scope of (i) the Prospectus Regulation (EU) 2017/1129 and (ii) the transparency requirements set forth in Directive 2004/109/EC, the Euro MTF is not a regulated market and, hence, offers a lighter listing and disclosure framework to issuers. High-yield bonds are regularly issued by corporate entities for financing, refinancing and general corpo- rate purposes.
Luxembourg’s economy has been strong and stead- ily expanding over recent years. Despite global and regional challenges, it continues to demonstrate remarkable resilience and adaptability. The COVID-19 health crisis squeezed the real economy by just 1.3% in 2020, and it bounced back robustly, rising by 5.1% in 2021. Despite a 1.1% contraction in real GDP in 2023, mainly due to declines in net exports and invest- ments, private consumption accelerated strongly in 2024, resulting in GDP growth of 1%. In 2025, due to declines in interest rates and an improvement in economic activity both within the euro area and in the EU’s external environment, a recovery in invest- ment is projected to drive real GDP to 1.7%. In 2026, Luxembourg’s real GDP growth is expected to rise to 2.0%, fuelled by robust domestic demand and a positive shift in net exports. Although the government deficit is increasing, it is backed by a general increase in spending. Luxem- bourg’s debt-to-GDP ratio is set to increase but to remain at an overall low level. The interest-rate hikes introduced by the ECB in response to the unprec- edented high inflation within the eurozone, together with enduring geopolitical uncertainty, have adversely affected investments due to higher borrowing costs. Luxembourg remains a major international financial centre that continues to attract financial institutions and investors from across the world. It has a boom- ing asset-management industry, with EUR5.9 trillion of AuM as of January 2025, and a solid banking sys- tem, with 118 authorised lenders operating as of June 2025. 1.2 Impact of Global Conflicts Luxembourg professionals of the financial sector, which is subject to the supervision of the Commis- sion de Surveillance du Secteur Financier (CSSF), have been obliged to implement and comply with the financial restrictive measures adopted by the European Union in response to Russia’s invasion of Ukraine. Accordingly, Luxembourg has reportedly frozen around EUR6 billion of Russian assets (as of
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