Download WHy INTERNATIONAL BANkING GROUpS cHOOSE LUXEMBOURG

Luxembourg | Why international banking groups choose Luxembourg
Yves Maas,
Chairman of the Luxembourg
Bankers’ Association (ABBL)
Why international
banking groups
choose Luxembourg
Yves Maas is Managing Director
and CEO of Credit Suisse S.A.
in Luxembourg. Mr Maas is the
Chairman of the Luxembourg
Bankers’ Association (ABBL) and
a Board Member of the European
Banking Federation (EFB).
As Chair of ABBL, the professional
organisation representing the
majority of banks and other financial
intermediaries established in
Luxembourg, he acts as the voice
of the whole sector on various
matters in both national and
international organisations.
Between 2013 and 2014, 10 new banks were established in Luxembourg,
both from the “Old Continent” as well as from non-EU countries. The Grand
Duchy today counts 143 banks from 27 different countries.
While certain doomsayers predicted that the introduction of the
automatic exchange of information would spell the end of Luxembourg
as a banking centre, reality has proven them wrong. There are several
reasons why such a decline did not take place.
First of all, and contrary to popular believe, Luxembourg’s success in
private banking is not built on banking secrecy, but on the quality of its
services and the high level of cross-border expertise on offer. Moreover,
the Luxembourg private banking industry was well prepared for the
introduction of automatic exchange of information. Over the past 4 years,
assets under management have remained stable thanks to the inflow of
new UNHWIS and internationally mobile clients. Tax transparency has
been an opportunity for Luxembourg private banks and wealth managers
to expand into new markets and attract new clients, some of whom may
have previously shied away because of the stigma of banking secrecy.
This new clientele requires expert wealth and succession planning
services for their businesses and their family, more often than not on
a multijurisdictional scale. This is what they find in Luxembourg.
An increasing number of international banks establish their Luxembourg
entity as a wealth management competence centre for international
clients. Luxembourg’s eurozone location and EU membership offer a
high degree of complementarity, as well as a number of competitive
advantages, vis-à-vis other major European private banking centres such
as London or Switzerland. And Luxembourg’s AAA status and political,
fiscal and financial stability is not only a key argument for banks
themselves, but also for their clients and their investors.
Importantly, however, there is much more to Luxembourg as a banking
centre than wealth management, even if the latter remains an important
and dynamic pillar of activity. Indeed, the diversity of Luxembourg’s
banking sector contributes significantly to its stability and attractiveness
for international groups.
European platform dossier | P. 3
The vast majority of banks in Luxembourg have a universal banking license.
While some banks have specialised in one particular activity, many make
full use of their universal license to offer a broad range of services to
private and corporate clients.
More than half of the banks present on the financial centre play a
central role in Luxembourg’s thriving fund industry. Leveraging on the
country’s position as the world’s leading cross-border investment fund
platform, banks in Luxembourg have specialised in global custody, fund
administration and offer a full range of fund services from product
creation, management companies services to custody.
Beyond the universal banking license, Luxembourg regulation also
foresees a special license for banks issuing covered bonds. The Luxembourg
covered bond regime offers the highest levels of investor protection, a
broad scope of eligible countries (all OECD countries are included) as well
as the possibility to use movable assets such as ships or planes.
Luxembourg has become a key location for corporate finance services.
Many banks in Luxembourg have specialised in organising and structuring
syndicated loans to finance international, cross-border projects.
Luxembourg’s expertise in the international credit business already
dates back to the 1960s, when the country played a central role in the
Euromarkets. Moreover, Luxembourg is generally regarded as having one
of the world’s best laws on financial collateral due to full protection
against insolvency risk as well as an efficient and safe enforcement process.
Non-EU banks, in particular, are using Luxembourg as their hub to support
the Euro liquidity needs of their corporate clients in the Eurozone. Having
such a hub allows banks to provide loans in Euro to their corporate banks
clients. For instance, Luxembourg is today home to the major Chinese banks
who have set up their European headquarters in Luxembourg. Locating
in the Grand Duchy enables them to leverage the EU passport in order to
branch out and accompany their corporate clients throughout the single
European market.
Many non-EU banks, including Swiss banks, also consolidate their cash
pooling and euro treasury in Luxembourg. They can thus leverage their
Luxembourg entity as an interface into the European Central Bank system.
Finally, banks in Luxembourg have access to the services of a comprehensive
financial centre ecosystem that includes essential market infrastructures,
such as the Luxembourg Stock Exchange and post-trade service providers
such as Clearstream, family offices, insurance companies, lawyers, tax experts,
consultants, auditors, accountants as well as a unique regulatory framework
that allows banks to outsource IT and operational processes to service
providers that are fully regulated by the financial sector supervisor.
Whether in private banking, fund services or corporate finance, Luxembourg
is the ideal location for banks to set up a pan-European hub to offer
financial products and services on a cross-border basis.
By Yves Maas
European platform dossier | P. 4
"Non-EU banks are using
Luxembourg as their hub
to support the Euro
liquidity needs of their
corporate clients."
Yves Maas
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