## Luxembourg: Financial Sector Assessment Program—Technical Note on Investment Funds: Regulation and Supervision

_IMF Staff Country Reports, June 24, 2024_

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## Bibliographic details
- Published: June 24, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400280344.002

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### Executive summary and key findings
- Commission de Surveillance du Secteur Financier (CSSF) has a robust supervisory framework with substantive improvements since the last FSAP.
- Some areas could be further strengthened, notably in enforcement, delegation oversight, and aspects of the domestic regulatory framework.
- Given the structural importance of delegation for Luxembourg domiciled funds, initiating an on-site inspection framework for delegates outside Luxembourg assumes importance.
- CSSF’s enforcement framework could be substantially improved through enhancements on four key fronts.
- CSSF could improve the domestic regulatory framework on winding up, valuation, and approach to indirectly regulated Alternative Investment Funds (AIFs).
- Given Luxembourg’s position as the domicile of EU’s largest IF sector, CSSF should actively continue to promote and contribute to EU level reforms on various topics.
- With respect to liquidity risks, CSSF should continue to actively contribute to the European Securities and Markets Authority’s (ESMA) guidance on the use of Liquidity Management Tools and to engage closely with ESMA and the EU Commission on the proposed revision of the Eligible Assets Directive.

### Policy recommendations and supervisory priorities
- Establish an on-site inspection framework for delegates located outside Luxembourg to address risks arising from widespread delegation.
- Strengthen CSSF’s enforcement framework by implementing enhancements across four key fronts (as identified in the technical note).
- Amend domestic regulatory frameworks to address:
  - Winding up procedures.
  - Valuation rules and practices.
  - The supervisory approach to indirectly regulated Alternative Investment Funds (AIFs).
- Continue active engagement and contribution at the EU level, including:
  - ESMA guidance on Liquidity Management Tools.
  - Engagement with ESMA and the EU Commission on the proposed revision of the Eligible Assets Directive.

### Risk focus: liquidity and systemic considerations
- Liquidity risk is a principal supervisory concern; CSSF should remain active in ESMA-led guidance on Liquidity Management Tools.
- Luxembourg’s role as domicile for the EU’s largest investment fund (IF) sector underscores systemic relevance and the need for active participation in EU reforms to mitigate cross-border and interconnected risks.

### Publication and metadata
- Publication title: Luxembourg: Financial Sector Assessment Program—Technical Note on Investment Funds: Regulation and Supervision
- Publication date: June 24, 2024
- Series: Country Report No. 2024/181
- Issue: 181
- Volume: 2024
- Pages: 48
- DOI: https://doi.org/10.5089/9798400280344.002
- Stock No: 1LUXEA2024004
- ISBN: 9798400280344
- ISSN: 1934-7685
- Subject tags: Financial institutions; Financial regulation and supervision; Financial Sector Assessment Program; Financial sector policy and analysis; Financial sector stability; Liquidity risk; Mutual funds; Systemic risk
- Keywords: Banque Centrale du Luxembourg; EU requirement; Europe; Financial Sector Assessment Program; Financial sector stability; Global; investment fund manager; investment fund Sector; Liquidity risk; managers directive; Mutual funds; Systemic risk

*Source: IMF Staff Country Reports — Luxembourg: Financial Sector Assessment Program—Technical Note on Investment Funds: Regulation and Supervision (June 24, 2024).*

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_Source: https://www.imf.org/en/publications/cr/issues/2024/06/24/luxembourg-financial-sector-assessment-program-technical-note-on-investment-funds-550830_