When Banks Insights was published last year, the clouds of banking secrecy were hovering over the industry. Since then, Luxembourg has had to make some tough choices. The end of an era meant a rethink on strategy and potential changes to operating models, especially for banks with less than €5bn in assets. The result has been consolidation, the repositioning of banks within international groups and – in certain cases – banks disappearing entirely from Luxembourg. Yet these moves were necessary to ensure a sustainable future for the financial centre.
Projecting ourselves beyond 2014, Luxembourg’s future can be seen from two angles. From one perspective, the clouds are set to remain on the horizon. A general increase in banking regulations (MiFID II, CRD IV, SSM) will come alongside an extension of the scope of the exchange of tax information. As a result, banks will see costs rise but interest margins and commission fall.
Looking bright
Viewed from a different angle – one that I prefer – the future begins to look much brighter. By embracing the exchange of information, Luxembourg has cast off the stigma of secrecy, leaving the way for us to promote the country, build up a strong and sustainable business model and give greater visibility to Luxembourg within international banking groups.
Glass half full
There is much cause to be optimistic:
Most banks are currently moving to compliance and are already starting to adapt their business model. One consequence is the assets under management have defied expectations and – as announced by ABBL – remain stable at €307bn.
We see new entrants to the market: not only Chinese banks but also different operating models, including payment institutions, commercial banks and other banking licenses are in the pipeline.
The fund business remains very strong and banks still benefit from this.
As you can see, a mixed future is emerging for Luxembourg banks. However we are applying more than a little caution in our predictions.
If such positive trends continue to ripen, we’re sure to have future successes in the financial place. Luxembourg has always been able to adapt itself and keep its AAA rating – all-important for marketing. This leaves me confident that we can continue to come out on top.
Luxembourg Banks Insights 2014
(Source: KPMG, Luxembourg)