Taking The Luxembourg Financial Collateral Arrangement Framework To The Next Level – Insolvency/Bankruptcy & More News Headlines


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The Luxembourg law on financial collateral arrangements
dated 5 August 2005, as amended, (the “Law”) has
provided, since its inception, market participants with a strong
and well-tested framework. In the context of the implementation of
Regulation (EU) 2021/23 of 16 December 2020 on a framework for the
recovery and resolution of central counterparties, the Luxembourg
legislator has taken the opportunity to further update the Law (the
“Update”). The Update has been voted by the Luxembourg
Houses of Parliament on 15 July 2022 and will soon enter into

Key features

Some of the key features of the Update are as follows:

-Any trigger event agreed between the relevant parties will be
recognized to allow enforcement.

-Enforcement of the financial collateral agreement even in the
event that no secured obligations are due and payable.

-Update and clarification of enforcement options, in particular
with respect to pledges granted over units or shares of collective
investment undertakings, life insurance contracts or capitalisation

-Express recognition of the possibility for electronic money
institutions and payment institutions to act as fiduciary in the
context of transfer of title for security purposes

-Further clarification that the insolvency remoteness of set-off
arrangements and security interests is to be understood as being
towards national and foreign law insolvency procedures.

This Update will be welcomed by market players as the legislator
has not only used this Update to  clarify various items but
has also introduced certain new features, adding to the robustness
of the Luxembourg financial collateral arrangements framework.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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