The CSSF published new circulars on central administration, internal governance and risk management.
1. Circular CSSF 20/757 announcing the introduction of circular CSSF 20/758 on central administration, internal governance and risk management and repealing circular CSSF 12/552 (as amended by circulars CSSF 13/563, 14/597, 16/642, 16/647, 17/655 and 20/750) on central administration, internal governance and risk management for investment firms. https://www.cssf.lu/en/Document/circular-cssf-20-757/
This circular is addressed to all investment firms. It specifies that it now integrates the EBA (European Banking Authority) guidelines, in particular on internal governance and on the assessment of the suitability of the members of the management body and the holders of key functions. It also announces certain terminological changes and clarified definitions. A trackchanges version of CSSF Circular 20/758 is annexed to CSSF Circular 20/757.
The main changes introduced by Circular CSSF 20/758 as compared to Circular CSSF 12/552 previously applicable to investment firms are the following:
a. The extension of the scope of application to financial holding companies and mixed financial holding companies ;
b. A more precise articulation of the concept of proportionality, through its connection to the notion of systemic establishment within the meaning of the amended law of 5 April 1993 on the financial sector ;
c. Details on the application of proportionality in the implementation of internal control functions;
d. The strengthening of the management body in its supervisory function through reinforced provisions on diversity and independence ;
e. The consideration of environmental, societal and governance (ESG) risk factors in order to ensure the viability of the business model.
Please note that an annex 2 to CSSF circular 20/757 contains a summary of the main changes compared to the measures so far applicable under CSSF circular 12/552 (p. 118-129).
2. CSSF Circular 20/758 on central administration, internal governance and risk management. https://www.cssf.lu/en/Document/circulaire-cssf-20-758/
3. Circular CSSF 20/759 concerning the update of circular CSSF 12/552 referred to above. https://www.cssf.lu/en/Document/circular-cssf-20-759/
Following these changes, CSSF circular 12/552 as amended by CSSF circulars 13/563, 14/597, 16/642, 16/647, 17/655, 20/750 and 20/759 (https://www.cssf.lu/en/Document/circular-cssf-12-552/) is now only applicable to all credit institutions and professionals carrying out lending operations. It therefore no longer applies to investment firms as from 1 January 2021, date of entry into force of CSSF circulars 20/757, 20/758 and 20/759.