Finance forward: strenght meets pioneering spirit

Interview: Paperjam (Marc Fassone; Thierry Labro)

Paperjam: We'll be discussing the future of the Luxembourg financial centre. But first, how can we ensure that the grand duchy does not lose its market share or the companies that are already established here?

Gilles Roth: First of all, the future is prepared through sound management of the current situation. That's why the government adopted, in the coalition agreement, an ambitious programme that aims to reinforce the attractive ness of the financial centre and the competitiveness of its players. And we have already achieved a lot. We reduced the corporate income tax (CIT) by one percentage point; we exempted all exchange-traded funds (ETFs) from the subscription tax; we introduced a very favourable tax regime for expatriates the first 400,000 of annual compensation are 50% exemptand we remodelled the profit-sharing bonus. We're, now work ing on changing the regime for investments in startups, including fintechs, as well as that of carried interest, in order to attract even more asset managers. The banking and financial community at large appreciates Luxembourg for its AAA rating, its political stability, its social cohesion and its predictability. Predictability means that one must deliver what one announces. That is what I have aimed to do since the beginning of my mandate.

Paperjam: Twenty years ago, there was a dynamic, "pioneering" spirit in the Luxembourg financial centre. Would you say it still exists or has it been lost, with players tending to rely on public action?

Gilles Roth: I don't believe that pioneering spirit has been lost. I meet many international financial institutions, asset managers, neobanks, eectronic payment service providers and fintechs, and the initiatives taken by the government encourage them to take an interest in Luxembourg. This is thanks, in part, to its predictable legal framework. Attracting them brings fresh blood. We also remain attentive to market developments to seize opportunities. I'm thinking in particular of the current interest in securitisation and initiatives taken within the framework of the Savings and Investments Union. It is a continuous process. As for the pioneering spirit, the High Level Committee of the Financial Sector is experiencing a renewed dynamic. It conducts discussions aimed at improving the attractiveness of the financial centre. The most promising ideas could, moreover, give rise to concrete initiatives.

Paperjam: You mention the diversification of the financial centre. What paths do you see ahead?

Gilles Roth: The financial centre relies on three pillars. The first is banking, insurance and reinsurancea pillar that must be continuously adapted. The second is the fund industry, which accounts for more than 7,600bn of assets under management. The industry benefits fully from the remarkable growth of alternative funds, especially European long-term investment funds (Eltifs), the deployment of which we have favoured. Two-thirds of these funds created in the EU are domiciled in Luxembourg. The third pillar, which should not be underestimated, is that of fin techs. When we talk about fintechs, that includes new activities that must be supported with appropriate legislative initiatives. I'm thinking of the Markets in Crypto-assets (Mica) regulation, blockchain and tokenisation. There is also the emergence of neo banks to which an appropriate legal framework must be given and the risks related to deposit guarantees carefully assessed.

Paperjam: Of the 76 operators authorised under the Mica regulation governing the crypto-asset market within the EU, only three are registered in Luxembourg. Are we losing ground to the competition?

Gilles Roth: The largest of these operators, Coinbase, received its licence in Luxembourg, and other files are being processed. We act with the necessary caution and we rely on quality in this field. The reputation of the financial centre is at stake.

Paperjam: How does Luxembourg's blockchain regulation give the financial centre a competitive advantage?

Gilles Roth: The great advantage of our framework is that it is technologically neutral, which allows the implementation of several technologies under a single regime. We also use this regime in connection with tokenisation. We have thus attracted HSBC's digital platform, Franklin Templeton's money market fund and we have launched, at the initiative of the treasury, a digital treasury certificate. It has brought strong publicity, as did the announcement that the sovereign wealth fund has opened its investment strategy to 1% for Bitcoins.

Paperjam: The government has announced that it wants to digitalise the financial sector. What's your roadmap?

Gilles Roth: For me, initiatives must come from actors on the ground. It is the government's responsibility to handle the legal side. Our approach, mirroring the European approach, is to ensure a legal framework that enables the promoter to act and deploy all their initiatives while ensuring investor protection. There is one area where I would like the government to invest more, together with other players in the sector; cybersecurity. It's a matter of our reputation, our resilience and our defence. Here, I would have no problem in seeing public money support private projects, including those that may fall under dual-use. This public funding would complement the investments made by large financial groups on a global scale investment that benefit the financial centre. I think parliament is, moreover, not opposed to associating public money with private initiatives in this domain, where necessary.

Paperjam: How can the private equity framework evolve to make it even clearer that Luxembourg is the jurisdiction of choice in Europe?

Gilles Roth: Luxembourg is fully open to implementing, as quickly as possible, the initiatives suggested in the reports by Draghi and Letta to further involve private equity as a source of financing for the European economy. In Europe, 80% of economic financing comes from the banking sector and only 20% from the non-banking sector. That must be rebalanced. To accelerate the development of the private equity sector, we have just revised the tax regime for carried interest. It's a strong message.

Paperjam: A request from private equity professionals heard in recent weeks, notably at the LPEA Insights 2025 conference and Luxembourg Venture Days, concerns the need to facilitate financing for green hydrogen. You say you are listening. Do you have projects in that respect?

Gilles Roth: There is great expertise in the financial centre when it comes to financing environmental projects. If adaptations are to be made at the legislative level that move in the right direction, I am open. Where I'd like Luxembourg to be more active is in blue finance, which refers to everything connected with water: its treatment and its protection, but also the protection against water-related events. This is what is called the blue economy. The potential is enormous in the southern hemi sphere and in the Pacific region. With the expertise that we have in financing environmental projects, this is a niche that should not be underestimated, and one which we should promote further. I've mentioned the topic to the Brazilian finance minister and to the new president of the African Development Bank. Both showed significant interest.