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New provisions for payment and e-money institutions to protect user funds and access designated payment systems

Luxembourg
14/04/2025
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On 7 April 2025, the law of 4 April 2025 on instant payments (the “Law”) was published in the Official Journal of Luxembourg to (i) introduce into Luxembourg law some provisions of Regulation (EU) 2024/886, which amends i.a. Regulation (EU) 260/2012 (SEPA), Directive (UE) 2015/2366 (PSD 2) and Directive 98/26/CE (SFD) and (ii) amend the law of 10 November 2009 on payment services.

To protect the funds received from users or other payment service providers for the execution of payments, payment institutions (“PIs”) must deposit them in a separate account with a credit institution. According to the Law, they may also deposit them with a central bank, at the latter's discretion. Similarly, electronic money institutions (the “EMIs”) will be able to safeguard funds received in exchange for electronic money by depositing them with a credit institution or a central bank, at the latter's discretion.

From now on, PIs and EMIs will be able to participate directly in designated payment systems. It should be noted that Luxembourg is making use of an option allowed by European legislation by treating an indirect participant as a direct participant where this is justified for reasons of systemic risk. However, in such case, this does not limit the liability of the participant by which the indirect participant is communicating the transfer orders to the system. 

However, to have this direct access, PIs and EMIs must comply with the conditions necessary to preserve the stability and integrity of payment systems. Consequently, PIs notify the CSSF in advance of their intention to do so, providing it notably with (i) the measures taken to protect users' funds and (ii) the governance arrangements and internal control mechanisms, including administrative, accounting and risk management procedures, as well as a description of the arrangements for the use of the PIs' ICT services. After examining these documents, the CSSF informs the Luxembourg central bank.

The Law comes into force from 11 April 2025.

Should you have any questions on the above, please do not hesitate to contact one of our experts of the regulatory team.

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