Luxembourg steps ahead: with the bill of law n°8628 filed on 29 September 2025 (the “Bill”), the Grand-Duchy charts the path for AIFMD II (Directive (EU) 2023/2225) and UCITS VI Directive (Directive (EU) 2023/2226). The Bill targets loan origination, liquidity risk management and operational simplifications for UCITS — signaling early alignment with the new EU regulatory framework.
Ban on Consumer Lending
A central feature of the Bill is the ban on AIFs granting loans to consumers established in Luxembourg.
This measure reflects a clear policy choice: loan origination by AIFs must remain focused on professional markets. Retail lending is reserved for regulated credit institutions. AIFs and loan-originating funds may continue to lend to professional borrowers, but consumer lending in Luxembourg will no longer be permitted.
For managers active in private credit, this is more than a technical adjustment. It may require revisiting investment policies, deal sourcing strategies or borrower eligibility criteria. The rule aligns Luxembourg with the broader EU objective of shielding consumers from exposure to non-bank lending structures.
A Harmonized Regime for Loan-Originating AIFs
The draft law also implements the harmonized EU framework for liquidity management tools (LMTs) applicable to both AIFs and UCITS.
Managers must ensure their funds have at least one appropriate LMT in place — for example, redemption gates, swing pricing, redemption in kind or anti-dilution levies. This reflects the EU’s push for more robust liquidity preparedness and supervisory convergence.
The Commission de Surveillance du Secteur Financier (the “CSSF”) will have enhanced powers to request activation or deactivation of these tools in exceptional circumstances. This additional flexibility aims to ensure consistent and effective supervisory responses during periods of market stress.
For managers, the impact will depend on their current set-up. Those already applying LMTs may only need to fine-tune their frameworks. Others will have to update fund documentation, operational procedures and governance models to comply with the new rules.
Streamlined UCITS Contributions in Kind
The Bill introduces a targeted simplification for UCITS.
Auditor reports will no longer be required for in-kind subscriptions where:
- the contributed assets are already eligible under the UCITS investment policy; and
- the contribution is made at market value.
This is a pragmatic step that reduces costs and processing times for investors and managers. It maintains investor protection while simplifying operational processes — a hallmark of Luxembourg’s regulatory approach.
Delegation, Depositaries and Reporting
The Bill also transposes other key elements of AIFMD II, including:
- Delegation: enhanced reporting and transparency obligations for AIFMs delegating portfolio or risk management functions, especially to third countries;
- Depositary passport: the ability, under certain conditions, to appoint a depositary in another Member State, adding operational flexibility for cross-border structures;
- Regulatory reporting: extended reporting requirements to strengthen supervisory convergence at EU level.
These measures will require coordination between managers and service providers to ensure timely implementation once the law is adopted.
What Should Managers Do?
Although the Bill must still go through the parliamentary process, its direction is clear. Managers should:
- Review investment strategies to ensure no exposure to consumer lending in Luxembourg;
- Assess liquidity frameworks and integrate an appropriate LMT;
- Leverage the UCITS in-kind contribution exemption where relevant;
- Prepare for enhanced delegation reporting and new depositary arrangements.
An early impact assessment and dialogue with the CSSF will help avoid rushed adjustments closer to the transposition deadline.
How Can Lextrust Help?
Luxembourg’s early move on AIFMD II and UCITS VI confirms its role as a front-runner in EU fund regulation.
The Bill combines regulatory tightening — on loan origination and liquidity management — with pragmatic operational simplification for UCITS. Fund sponsors and managers now have several months to align their structures and processes ahead of the April 2026 deadline.
Lextrust assists asset managers, fund sponsors and service providers in assessing the impact of these changes, adapting fund structures, reviewing fund documentation and preparing regulatory filings.
Our team closely monitors the legislative process to anticipate practical implications and ensure a smooth transition.
At Lextrust, our investment fund regulatory team is fully equipped to assist you in understanding and implementing the necessary legal, operational, and strategic adaptations under AIFMD II and UCITS VI.
For further information, please contact us to arrange a consultation ahead of the 2026 implementation deadline with:
Jonathan Charles BURGER
Founding Partner
burger@lextrust.lu
To read more about draft bill n°8628: https://www.chd.lu/fr/dossier/8628
