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New regulatory requirements for Luxembourg Credit Institutions and Luxembourg branches of non-EU credit institutions linked to the new CSSF Circular 22/821 (Long Form Report)

28/10/22

In brief

On 25 October 2022, the Commission de Surveillance du Secteur Financier (CSSF) issued the new Circular 22/821 whereby the long form report following the requirements of Circular 01/27 as amended, is replaced by a self-assessment questionnaire (SAQ) to be completed by the credit institutions and the Luxembourg branches of non-EU credit institutions (the institutions). It also introduces Agreed Upon Procedures (AUP) reports to be issued by the réviseurs d’entreprises agréés (REA) of the institutions. Only institutions closing their financial year on or after 31 December 2022 are subject to this new Circular 22/821.

Finally, a separate report on the protection of financial instruments and funds belonging to clients as required under Article 7 of the Grand-ducal Regulation of 30 May 2018, and another separate report covering Anti-Money Laundering/Countering the Financing of Terrorism AML/CFT further to CSSF Regulation N°12-02, are to be established by the REA of the institutions annually.

In details

The CSSF Circular 22/821 introduces as from 31 December, 2022 closing to all Luxembourg credit institutions and Luxembourg branches of non-EU credit institutions:

  • a Self-Assessment Questionnaire (SAQ) to be completed by institutions; 
  • the Agreed Upon Procedures report(s) (the AUP report(s)) to be prepared by the REA under ISRS 4400 (revised) Standard); 
  • a separate report to be prepared by the REA on the protection of financial instruments and funds belonging to clients; 
  • a separate report to be prepared by the REA on the procedures set up by institutions concerning the prevention of money laundering and terrorist financing (the AML/CFT report).

The self-assessment questionnaires to be completed by institutions cover several topics:

  • Internal governance;
  • IT risk; 
  • Credit risk;
  • Large exposures;
  • Related parties; 
  • Foreign branches; 
  • MiFID; 
  • PSD 2; 
  • Depositary bank;
  • Consolidation aspects. 

The AUP reports of the REA will be performed on some specific topics of the SAQ (based in principle on a three-year plan defined by the CSSF). During the year 2023, the REA will cover MiFID and PSD 2 based on the information related to the financial year 2022.

Please find below, a summary of the yearly deliverables, responsibilities, scope and deadlines:

Deliverables

Completed by

 Scope  Deadlines
Self-Assessment Questionnaire (SAQ)

The Institution

 

SAQ on:

  • Internal governance;
  • IT risk;
  • Credit risk; 
  • Large exposures;
  • Related parties;
  • Foreign branches; 
  • MiFID;
  • PSD 2; 
  • Depositary bank; and
  • Consolidation aspects.
  • For the year 2023 only (based on the information related to the financial year 2022) within 4 months of the closure of the financial year.
  • Then within 3 months after the closure of the financial year.
Agreed Upon Procedures reports (AUP) The REA

For the year 2023, based on the information related to the financial year 2022: 

  • MiFID; and 
  • PSD 2.
  • For the year 2023 only (based on the information related to the financial year 2022) within 6 months of the closure of the financial year.
  • Then within 5 months after the closure of the financial year.
Separate report to be prepared by the REA on the protection of financial instruments and funds belonging to clients

The REA

 

 Cover the adequacy of the arrangements under Article 37-1(7) and (8) of the Law of 5 April 1993 on the financial sector, as amended, Article 13, paragraph 4 of the Law of 5 August, 2005 on financial collateral arrangements, as amended, and Section 2 of the Grand-ducal Regulation of 30 May, 2018.
  • For the year 2023 only (based on the information related to the financial year 2022) within 6 months of the closure of the financial year.
  • Then within 5 months after the closure of the financial year.
Separate report to be prepared by the REA on the procedures set up by institutions concerning the prevention of money laundering and terrorist financing (the AML/CFT report)

The REA

 

 Cover the requirements further to the CSSF Regulation 12-02.
  • For the year 2023 only (based on the information related to the financial year 2022) within 6 months of the closure of the financial year.
  • Then within 5 months after the closure of the financial year.

This circular repeals CSSF Circular 01/27 as amended (Practical rules concerning the role of réviseurs d’entreprises (statutory auditors)) as well as IML Circular 96/125 (Supervision of credit institutions on a consolidated basis).

For further information, the Circular is available in English (only) here: CSSF Circular 22/821.

In conclusion

Institutions should carefully consider the content and requirements introduced by Circular 22/821 and be prepared for complying with them. 

Our Governance, MIFID and AML experts would be delighted to support you in ensuring that these requirements are fully understood and helping you to get prepared. 

We have the pleasure to invite our clients for a more detailed information session in November 2022. A separate communication will be sent soon.

For mission and related reports of the statutory auditors (réviseurs d’entreprises agréés) and the protection of financial instruments and funds belonging to clients: Olivier Delbrouck and Antoine Marchon.

For MiFID and PSD 2: Cécile Liégeois.

For AML/CTF: Roxane Haas and Cécile Moser.

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