Luxembourg’s banking sector: Facts & Figures
Updated September 2019 – For earlier editions of Facts & Figures click here
Luxembourg’s international banking centre has a long-standing expertise in financial services, ranging from international private banking and wealth management, retail banking, corporate finance to fund services and depositary banking. Luxembourg is leveraging its unique strengths and attributes to position itself as a leader in emerging fields such as innovative financial technologies (‘Fintech’) and sustainable finance.
Growth in Luxembourg was close to 3% in 2018, mostly carried by strong consumer spending. Employment has grown by 3.7% year-on-year in 2018. Employment in the financial sector grew by more than 4.1%.
The banking sector is the main economic engine. In 2018, it has one third of the Gross Domestic Product (GDP), 11% of employment and 21% of fiscal revenues.
Luxembourg features the highest banking internationalisation rate in Europe (94.8%) with more than one third of the 136 banks coming from outside the European Union. These banks are operating an expanded business model on a cross-border basis, using an EU passport for providing financial services across Europe, particularly in private and corporate banking as well as in asset servicing.
Banks in Luxembourg have sufficient own funds to face potential difficulties with a CET1 ratio of 25,1%. With 25,9% solvency ratios remained well above the thresholds and banks show a high level of capitalisation.
Online banking and digital payments boast high utilisation rates with 96% for the 25-34 age range making use of online banking. Also, debit or credit card transactions have accounted for 63% of the total payments in volume in 2018.
Loans increased by 6.7% year-on-year, thanks to the contribution of the retail banking, corporate banking and private banking sectors. At the same time, the evolution of deposits is stable. On a general basis, deposits are still higher than loans, ensuring a robust stability and a high liquidity in all credit institutions.
Over the last years, Luxembourg’s stable and diversified financial ecosystem has facilitated the establishment of new banks incorporating their European hubs in Luxembourg, including the seven largest Chinese banks – Bank of Communications, the China Merchants Bank, the Agricultural Bank of China, the Bank of China, the Industrial and Commercial Bank of China, the China Construction Bank and the China Everbright Bank. Chinese banks led the sector in terms of year-on-year balance sheet growth in 2018.
Luxembourg’s commitment to sustainable finance has created an ideal environment for mobilising international capital for green projects. Luxembourg is a frontrunner in pushing for the most advanced solutions, testing and implementing new approaches to ensure that sustainable finance products are widely available.
In October 2018, Luxembourg’s Government, together with the United Nations Environment Programme Finance Initiative (UNEP FI), officially launched the Luxembourg sustainable finance roadmap.
According to the first sustainable finance survey conducted in 2017 by the Luxembourg Bankers’ Association among the country’s foremost financial institutions:
- 85% of financial institutions already incorporate social and environmental elements in their vision and strategy and are signatories of global or local sustainability initiatives;
- More than 65% of respondent banks offer green finance products to their clients;
- The main drivers behind the adoption of sustainable finance practices are deemed to be brand recognition (76%), stakeholder (64%) and shareholder requirements (64%);
- Banks are experiencing a growing demand from clients for green products (28%)
Building on its strong and longstanding track record characterised by stability and international outreach, Luxembourg is expanding its leadership in areas such as e-commerce, e-payment and fintech which are currently reshaping the global financial sector.
Contributor: Jérôme Verony email@example.com