LUXEMBOURG Trends and Developments Contributed by: Arnaud Arrecgros, Yann Hilpert, David De Pasquale, Beatriz Garcia and Antoine Becker, Maples and Calder
Introduction of “resilient securitisations” The creation of “resilient securitisations” as a new cat- egory is intended to ensure strong performance even under economic stress. This is to be achieved through stricter criteria, including amortisation, asset granu- larity, and credit enhancement, which in turn would allow such securitisations to benefit from lower capital requirements, making them more attractive to institu- tional investors and cheaper for banks. The Commission considers this reform effective in improving investor confidence and funding efficiency. Nevertheless, the overly broad definition of this reclas- sification could, once again, subject many previously private deals to stricter reporting obligations, poten- tially increasing costs and operational complexity. Supervisory co-ordination via the EBA To improve regulatory coherence, the EBA will lead a newly formalised Joint Securitisation Committee. This body will co-ordinate supervisory practices, develop technical standards, and oversee third-party STS veri- fiers, ensuring more centralised oversight. The move aims to reduce fragmentation and ensure consistent application of rules across EU member states. While the reform is expected to reduce fragmentation, its success depends on member state co-operation and consistent implementation. Principles-based overhaul of the SRT framework The reform replaces rigid mechanical tests with a principles-based approach for assessing Significant Risk Transfer, giving banks more flexibility, while also demanding greater transparency and legal rig- our. Originators must demonstrate that at least half of unexpected losses are transferred, supported by internal modelling and documentation. A fast-track review mechanism will be available for straightforward cases, improving efficiency and, in the Commission’s view, ensuring that regulatory out- comes align more closely with economic substance. Conclusion and next steps The Commission’s reform package reflects a strategic recalibration of the EU securitisation framework. By addressing inefficiencies and promoting resilience, the
proposals aim to restore confidence in securitisation as a viable funding and risk management tool. However, it remains uncertain whether these propos- als will create fresh opportunities for banks, insurers, and investors. Success will hinge on careful imple- mentation and whether the final legislation strikes the appropriate balance between oversight and flexibility. The critical question is whether these measures will generate genuine solutions rather than inadvertently creating new barriers that could leave the EU securiti- sation market still lacking proper integration. What lies ahead? The reform proposals to the EU Securitisation Regulation serve as the starting point, with further amendments likely over the coming 18 to 24 months as the legislative process develops and the proposals undergo scrutiny by the European Par- liament and Council. Meanwhile, market participants would be well advised to prepare for implementation, ensuring they are ready to embrace a new chapter in EU securitisation that will hopefully be characterised by enhanced efficiency and transparency. Blockchain IV Law On 19 December 2024, the Luxembourg Parliament adopted the Blockchain IV law, marking another major step forward in the Grand Duchy of Luxembourg’s initiatives to align its legal framework with the rapid development of blockchain technology (known as dis- tributed ledger technology, or DLT). The Blockchain IV Law introduces the possibility for issuers of dematerialised securities to appoint a new type of entity, referred to as the “control agent”. The control agent will be in charge of (i) maintaining the issuance account within or through DLT; (ii) continu- ously monitoring the chain of custody of dematerial- ised securities held in securities accounts within or through DLT; and (iii) ensuring that the total amount of securities issued for each issuance recorded in an issuance account within or through DLT is equal to the sum of the securities recorded in the securities accounts of account holders. The law sets out internal governance rules for the enti- ty acting as control agent. The latter must notify the CSSF ( Commission de Surveillance du Secteur Finan-
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