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Luxembourg’s banking sector: Facts & Figures

The financial services industry, and more specifically the banking sector, plays a key role in the Luxembourg economy. Although the Luxembourg economy is well diversified, the financial services industry represents approximately 26% of total GDP.

Luxembourg’s economy grew by close to 4% in 2016 and is forecasted to increase in 2017. Unemployment stood slightly higher than 6%. Both services and industries contribute to this positive trend.

Out of the 143 credit institutions in Luxembourg, five are from Luxembourg and the rest are coming from 30 different countries, meaning an internationalisation rate of 96.5%, the highest in Europe. In the wake of the 2008 financial crisis, many financial groups have had to reorganise and restructure their businesses internationally. These changes have also had an impact on the Luxembourg banking centre, where the number of banks has decreased, giving way to fewer but larger entities via mergers and acquisitions.

In the last few years, however, a number of new banks from third countries have established their European hubs in Luxembourg, among which – but not exclusively – the six largest Chinese banks, including ICBC the world’s largest bank, Bank of Communications, Agricultural Bank of China, China Construction Bank and China Merchants Bank. Two other major Chinese banks have officially announced their intention to establish a bank in Luxembourg. Luxembourg aims to become one of Europe’s most attractive places for Renminbi business, be it through listing, issuing instruments, RQFII scheme or trade finance.

In addition, many international banking groups are today establishing their competence centres in Luxembourg, either in private banking, fund administration, custodian services, in treasury management, or as booking centres for international loans.

With regards to payments, banks are preparing the renewal of their infrastructure in line with SEPA and PSD2 and are preparing to offer instant payments.

Credit institutions in Luxembourg enjoy a high level of capitalisation. On the credit side, the trend is, as in previous years, towards a positive path, recording an increase of 5.3% from March 2016 to March 2017: retail banking, corporate banking, as well as private banking, are all contributing to this increase. Over the same period, deposits increased by 0.63%. On a general basis, deposits are still higher than loans, ensuring a strong and robust stability in all credit institutions.

The Luxembourg financial centre is a major worldwide distribution platform for investment funds. Collective investment management has been developing since the mid-1980s. Luxembourg is the world’s second investment fund centre after the US, and Europe’s first, with around €3,741 billion in assets under management, as of end 2016.

As demand for green finance is rising, a new stock exchange service, Luxembourg Green Exchange (LGX), was launched in 2016 and is home to 114 Green Bonds amounting to more than €50 billion in 19 currencies from 25 international issuers. The LGX aims to provide issuers and investors with an environment for securities that are truly green. Entry is restricted to issuers that provide full disclosure and fulfil their reporting obligations, and, in doing so, ensure quality green issuance for investors. The LGX has the most listed Green Bonds worldwide.

Despite the unfavourable global environment and very challenging low interests rates, credit institutions increased their global net results by 18% (provisional figures); and banks able to control their costs efficiently and create growth in incomes. Capital and reserves expanded by 4% from 2015 to 2016.

Banking employment increased from 25,897 in 2015 to 26,062 end-2016.

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