Luxembourg Securitisation Law: Proposed changes under Bill of Law No. 8761

On 8 June 2026, Bill of Law No. 8761 was submitted to the Luxembourg Chamber of Deputies, proposing a series of targeted amendments to the law of 22 March 2004 on securitisation (the Securitisation Law). Although the Luxembourg securitisation framework is already widely recognised for its flexibility and legal certainty, the proposed reform aims to modernise the existing legal framework and ensure it continues to meet the needs of an evolving financial market.

The Bill does not fundamentally overhaul the existing regime. Instead, it introduces practical enhancements that would provide greater structuring flexibility, improve legal certainty and align the Luxembourg securitisation framework with current market practice. The proposed amendments concern, among other things, financing methods, active management, intra-compartment investments, guarantees and security interests, subordination rules and asset segregation.

As Bill 8761 is still progressing through the legislative process, its provisions remain subject to parliamentary approval and may be amended before entering into force. The proposed amendments build on the reforms introduced in 2022 and seek to further enhance the flexibility and legal certainty of Luxembourg’s securitisation regime in response to evolving market practices.

Key Takeaways

• More flexible financing: Luxembourg securitisation vehicles would be able to raise funding through any type of financing or other financial commitment, rather than being limited to financial instruments or any form of loans.
• Broader active management: Active management would be extended to all categories of securitised assets for transactions not offered to the public.
• New structuring opportunities: Compartments of the same securitisation vehicle would be permitted to invest in one another, subject to safeguards preventing circular investments.
• Greater legal certainty: The Bill clarifies the rules governing guarantees, security interests and the statutory ranking of financial instruments.
• Enhanced investor protection: Asset segregation would be further reinforced by protecting the assets of securitisation funds in the event of the insolvency of their management company.

At a glance: Current Law vs. Bill 8761

The table below summarises the principal differences between the current Luxembourg Securitisation Law and the amendments proposed by Bill of Law No. 8761.

Topic	Current securitisation law	Bill 8761
Financing	Financial instruments or any form of loans	Any type of financing or financial commitment
Active management	Active management limited to portfolios of debt securities, debt financial instruments, loans and receivables in non-public transactions.	Extended to all categories of securitised assets in non-public transactions, with clarification that certain portfolio maintenance activities do not constitute active management
Intra-compartment investments	No express statutory framework	Expressly permitted, subject to anti-circular investment rules
Guarantees & security interests	Security and guarantees permitted in connection with obligations related to the securitisation transaction	Expressly clarified to also cover certain third-party obligations connected directly or indirectly with the securitisation transaction or an investment therein
Subordination	Statutory subordination applies, but the treatment of benchmark-rate debt instruments is not expressly addressed	Clarifies that benchmark-rate debt instruments (e.g. EURIBOR + margin) rank alongside fixed-return debt instruments for statutory subordination purposes
Asset segregation	Existing statutory asset segregation principle	Expressly confirms that the assets of a securitisation fund are segregated from the insolvency estate of its management company

Why does the reform matter?

Since the adoption of the Securitisation Law in 2004, Luxembourg has become one of Europe’s leading jurisdictions for securitisation transactions. The regime’s success is built on its flexibility, bankruptcy-remoteness principles and the ability to establish multi-compartment securitisation vehicles.

As financial markets continue to evolve, market participants increasingly require structures capable of accommodating private credit, structured finance, warehouse financing and other sophisticated investment strategies. Bill 8761 seeks to respond to these developments by modernising selected provisions of the existing framework while preserving the key features that have contributed to Luxembourg’s success.

1. Broader financing possibilities

One of the most significant proposed amendments concerns the financing of securitisation undertakings.

Under the current Securitisation Law, following the reforms introduced in 2022, securitisation undertakings may finance their activities through the issuance of financial instruments or by contracting any form of loans.

Bill 8761 proposes to broaden this framework further by allowing securitisation undertakings to obtain funding through any type of financing or other financial commitment. This would considerably expand the range of financing techniques available in practice.

The amendment is expected to facilitate more bespoke financing structures and may prove particularly useful where traditional debt instruments are not appropriate or cannot be used, including certain Islamic finance transactions and innovative structured finance arrangements.

2. Expansion of active management

Another important development concerns the rules governing active management.

Currently, active management is only permitted in limited circumstances involving portfolios of debt securities, debt financial instruments, loans and receivables, provided that the financial instruments are not offered to the public.

Bill 8761 would further broaden this framework by allowing this possibility to all categories of securitised assets, provided that the financial instruments are not offered to the public.

The Bill also clarifies that certain portfolio substitutions, renewals and limited adjustments carried out during the life of a transaction should not automatically be regarded as active management.

These proposed changes recognise the commercial reality that even transactions intended to be managed passively often require limited adjustments over time.

If enacted, the reform could further enhance Luxembourg’s attractiveness for sophisticated private credit and structured finance transactions involving actively managed portfolios.

3. Introduction of intra-compartment investments

Luxembourg securitisation vehicles frequently operate through multiple compartments, each representing a separate pool of assets and liabilities.

Bill 8761 proposes to expressly permit one compartment to invest directly or indirectly in another compartment of the same securitisation undertaking.

This additional flexibility could simplify the structuring of complex transactions by allowing different financing layers or investment strategies to coexist within a single legal entity.

To protect investors, the Bill prohibits circular investments. Furthermore, where one compartment invests in another through debt instruments, the investing compartment would enjoy the same rights as an external third-party creditor.

4. Clarification of guarantees and security interests

The Bill also clarifies the circumstances in which securitisation undertakings may grant guarantees or create security interests.

Under the proposed rules, securitisation undertakings would be expressly permitted to secure not only their own obligations but also certain obligations of third parties that are directly or indirectly connected with the securitisation transaction or with an investment in that transaction.

Although many transactions have already been structured on this basis in practice, the proposed clarification would provide welcome legal certainty.

5. Clarification of subordination rules

Bill 8761 also refines the statutory subordination regime applicable to financial instruments issued by securitisation undertakings.

The proposed amendment clarifies that instruments bearing interest calculated by reference to a benchmark rate, such as EURIBOR, together with a fixed margin, should rank alongside fixed-rate debt instruments.

This clarification better reflects current market practice and removes uncertainty regarding the treatment of commonly used floating-rate instruments.

6. Reinforced asset segregation

Asset segregation has always been one of the defining characteristics of the Luxembourg securitisation regime.

Bill 8761 further strengthens this principle by confirming that, where a securitisation fund is managed by a management company, the assets of the fund remain separate from those of the management company in the event of its insolvency.

Consequently, creditors of the management company would have no recourse against the assets of the securitisation fund. The proposed amendment aligns the Securitisation Law more closely with principles already recognised under Luxembourg investment fund legislation.

Practical implications

Although the proposed amendments are targeted rather than revolutionary, they collectively represent another important step in the continued evolution of the Luxembourg securitisation framework.

The Bill would provide greater structuring flexibility while improving legal certainty in areas that have generated questions in practice.

The proposed amendments are likely to be particularly relevant for sponsors, originators, arrangers, private credit managers and other market participants seeking greater structuring flexibility. Broader active management rules are likely to enhance the attractiveness of Luxembourg securitisation vehicles for private credit strategies, while the expanded financing options and the introduction of intra-compartment investments should facilitate increasingly sophisticated transaction structures. In addition, the clarifications regarding guarantees, security interests and subordination are expected to provide greater legal certainty for market participants.

If adopted in its current form, Bill 8761 would further reinforce Luxembourg’s position as a leading jurisdiction for domestic and cross-border securitisation structures.

Conclusion

Bill of Law No. 8761 represents a targeted but meaningful step in the continued evolution of the Luxembourg Securitisation Law. Building on the reforms introduced in 2022, the Bill seeks to further enhance the flexibility and legal certainty of Luxembourg’s securitisation framework by expanding financing possibilities, broadening the scope of active management and clarifying several important aspects of the existing regime.

Although the Bill remains subject to the legislative process, it reflects Luxembourg’s continued commitment to maintaining a modern and competitive securitisation framework that responds to evolving market practices. Market participants considering Luxembourg securitisation structures should therefore monitor its progress and assess how the proposed amendments may affect future transactions.