"The reputation and image of our banking centre is one of my very personal concerns. Honestly, I am fed up with being accused of being a defender of a tax haven and a hotbed of sin. We need to work on our image and I am very motivated to convey to the world what our financial sector really represents."
Your Royal Highness
Dear Chairman Contzen,
Ladies and Gentlemen,
The Luxembourg Bankers’ Association is celebrating its seventy-fifth anniversary. Seventy-five – that’s quite a distance. Usually, when people turn seventy-five years, they prefer to lie back and enjoy their retirement. Dear Friends of the ABBL, for you as for me and my government: it is not the time to lie down and relax.
The financial sector in Luxembourg is in the midst of a significant renewal process in an environment that is not necessarily friendly. The challenges are huge but so are the opportunities at a moment when our Luxembourg Financial Centre is entering a new period - the period of international financial transparency.
Almost a year ago the Parliament transposed a European directive into national law that set the conditions for administrative cooperation in the field of taxation.
In April last year, my predecessor announced that Luxembourg is going to
apply the automatic exchange of information foreseen in the EU Savings Directive with effect from 1st January 2015.
A month ago Luxembourg and the United States have agreed on the substance of the future “Model One Agreement” of the Foreign Account Tax Compliance Act (FATCA).
And five days ago, at the European Council meeting, I announced that Luxembourg is going to support the extension of the EU Savings Directive.
Some observers think that these recent decisions are bad news and constitute a significant threat for the Luxembourg financial sector. I am convinced that exactly the opposite is the case: these decisions are the starting point of a new period in the continuous evolution and development of our Financial Centre. They offer far greater opportunities for growth than threats. I know that many of you share this view. In fact the developments of the last couple of months show that there is a reason why we are the leading banking centre in the Eurozone. One of our main competitive advantages has been confirmed: we demonstrated our flexibility and our ability to adapt to the new realities when it is necessary to do so. We can show that we are not afraid of competition with other European and international banking centres.
The financial sector in our country is unique. We offer a wide range of services for individuals, institutional and corporate clients.
I had the pleasure to participate at the inauguration of the new premises of the Luxembourg Stock exchange this month. This was a good occasion to recall that it was the Eurobond market, launched 50 years ago marking the beginning of a success story. This specific market was one of the key drivers of the Luxembourg Financial Centre and still is a key pillar today with many Luxembourg banks being instrumental in its development.
We have more than 40 years of experience in Private Banking and Wealth Management. Our financial centre is a symbol for stability, and people from every part in the world entrust their money to our banks. Most of the Private Banking clients originate from European countries but the share of non-european clients has been increasing in the last few years. We offer specific products and personalized services from classic saving products to sophisticated solutions for maintaining and maximizing wealth.
Luxembourg is also a well-known business centre for corporate clients. The corporate banking market in Luxembourg provides a huge range of services to multinational companies such as to local business and start-ups.
Our Asset Management sector is of course a unique success story of Luxembourg. From being the first EU country to transpose the UCITS directive in the 80s, to being today the second largest fund centre in the world, after the United States. Luxembourg is number one in Europe with nearly 4,000 funds based here and with assets amounting to over 2,600 Billion Euros. More important than this figure is the fact that Luxembourg is and will remain the number one place worldwide for cross-border distribution of UCITS. Asset serving through custody and administration services is consequently another pillar of the Luxembourg banking industry. Currently we are adapting the conditions in order to explore new markets such as microfinance or sharia funds.
Another field of activities that is worth mentioning is the insurance sector. It counts over 300 companies amounting to total premiums of over 30 billion euros. It is a very stable industry that employs more than 4.000 people in Luxembourg. We have an internationally recognized expertise in this field and we should be proud of the fact that we have managed to keep it strong despite a difficult environment during the last years.
Ladies and Gentlemen,
Even though a lot of work has already been done in the process of adaptation, there are key challenges we have to tackle in the coming months.
First and foremost, we need to further remodel our offer on the market and make sure that we continue to be attractive for foreign investors. Considering the gradual decline in sovereignty niches, we will increasingly be rated on the quality of the service and the quality of the people working in the sector. On the one hand, this means that we need a top level school system and on the other hand we also need to attract highly talented people from other countries.
As far as education is concerned, let me just say these few words. My government is determined to reduce investments in several sectors – but not in those securing our future. Education and research are the main pillars in the process of modernizing this country’s economy and society. When we talk about the school system in Luxembourg, we have to take into account our specific demographic situation. Today nearly 60% of the children born here do not grow up with Luxembourgish as their native language. We believe that this reality can be turned into a major asset. Being able to live and work in a multilingual country is part of this preparation and should not be neglected.
We want to implement a school system that is much more tailored to and focused on individual needs, requirements and qualifications. A system endorsing a talent instead of punishing a weakness has been proven to be more successful in the long term. A mentoring system with tutors assisting young people is therefore part of the plan we are going to implement. This change of approach in the school system is a long term process and will result in a situation where not only well educated but also motivated young people enter the labour market.
On a short term basis we also have to convince the best people from around the world to come to Luxembourg to study, to live and to work here – not exclusively but also in the financial sector.
The quality of Luxembourg University is of a very high importance when we talk about attracting talented young people to our country. Recent developments are encouraging: In the Second Evaluation by the External Committee of the University of Luxembourg last year, the Faculty of Law, Economics and Finance was allocated top grades.
I quote the report of the External Committee when I say: “The Faculty’s achievements are impressive. It has built up a strong and coherent academic team, has developed a solid and strategically focused teaching portfolio and high quality and visible research.” This sounds good to me as it sounds good to students from around the world. A strong link between the University and the business world is an important element and it is a clear priority for my government to endorse cooperation and exchange between the University and the business world.
When we talk about attracting top level talent to Luxembourg we also have to be aware of the fact that general living conditions are a factor of competiveness. The cultural offer is an important element in this, as are the quality of the health sector, the school system and also the taxation on salaries.
The aim must be to attract the best people because of job opportunities and to convince them to stay here because they like it.
But even the best people can’t display and develop their talent if the legal framework and the economic environment prevent them from doing so. The main advantages of our financial sector are flexibility, innovation and determination.
The Authorities but also the private sector itself need to be quick in decision-taking. We absolutely have to maintain our flexibility in reacting to and anticipating international evolutions and trends. A strong interaction between governmental institutions and the sector is therefore important and will be endorsed.
It is also the role of banks and other companies of the sector to develop new services, to create an offer and to propose new fields of activity. This is crucial for the future: You need ideas and you need the courage to explore new ground. The government needs the determination to create an environment that allows you to do so – I can assure you, we are determined.
Your Royal Highness, dear Chairman Contzen, Ladies and Gentleman,
I am convinced that the financial sector in Luxembourg is in a good shape and that it will become even stronger in the coming years.
I told you before that when we are talking about Luxembourg as a banking centre, we have no reason to sell it below value. We ARE top level and there are many opportunities to make sure that we STAY there.
We must build on the fundamental achievements and develop further. For example we could transform our Private Banking centre from the current affluent clients to a new clientele of wealthy individuals and families requiring sophisticated solutions. Since we are approaching a level playing field situation, there is a huge potential in attracting clients from around the globe. They seek a highly professional service that they can trust and an environment where they feel that their investment is safe. My government is committed to work on the branding of Luxembourg as a financial centre where data protection and the protection of private life are a part of the competitive advantages that allow us to compete with Private Banking centres in other countries – like Switzerland, Singapore or the city of London for example.
Asset Management remains a key pillar of our financial centre, and is one of the main activities of Luxembourg banks through their custody and asset servicing activities. We need to consolidate that leadership with UCITS V(five) and VI (six) at the doorstep. We should think about getting a larger part of the Asset Management value chain to Luxembourg, in particular in the case of Asian and Chinese managers who are and will be coming to Europe and decide where to base themselves. Luxembourg should become their preferred option.
The Alternative Fund Industry is another field of activity where we can build on our experience in order to expand. In July last year, Luxembourg was among the first European countries, to transpose the Alternative Investment Fund Manager Directive (AIFMD) into domestic law. This represents an opportunity for us to create a brand in the alternative investment market, similar to the global brand we have created with UCITS.
Already today we are the number one domicile for Private Equity funds in Europe with a worldwide market share of around 10% of all Private Equity funds: we need to be pro-active, invest in this area and attract some of the World’s largest Private Equity funds to Luxembourg. We also need to convince the alternative fund managers themselves to relocate to our country.
When we talk about opportunities for the financial sector in Luxembourg, we also have to open the geographical circle of opportunities. We already managed to convince 3 large Chinese banks to establish their European headquarters in Luxembourg. Our reputation in China is excellent. Thanks to both intensive network activities from government side and business relationships, Luxembourg is becoming the key gateway for in- and outbound investment from China - both in the financial and non-financial sectors. Luxembourg is perceived as a strong partner of China and we will continue to invest in the long term relationship with China.
Another opportunity for diversification is an expansion in Islamic Finance. We already are the most important financial centre for Islamic Finance outside the Muslim world. The Luxembourg Stock Exchange was the first to list a sukuk, in 2002. Since then, issuers from many Islamic countries like Saudi Arabia, or the the United Emirates have listed financial certificates in Luxembourg. At the same time, the Grand Duchy flourished as a domicile for Islamic investment funds. The direct and indirect tax treatment of various Islamic products has been clarified by the relevant authorities. Today, we are about to issue a sovereign sukuk. Once the bill has passed the Parliament, it will allow securitisation of three properties for a sukuk issue worth 200 million euros.
This is a concrete example of our diversification policy in a field with a huge potential.
Ladies and Gentlemen,
Today is not the time for a requiem, we are celebrating and there are good reasons to do so. Our financial centre is fit for the challenges ahead and the government is supporting you in this time of change. We have the responsibility to provide you with the right framework and a business friendly environment that allows an expansion of the financial sector.
My government will make sure that the key advantages will prevail. Luxembourg has always been a symbol for stability and for legal and tax predictability. This won’t change. Planning security is of major importance for companies and corporations. Even though we are planning a major tax reform, I can assure you that tax competitiveness is high on my government’s agenda.
We will continue to work closely with the private sector, for example through the “High Committee of the financial centre”, but also directly with key players like the ABBL.
The reputation and image of our banking centre is one of my very personal concerns. Honestly, I am fed up with being accused of being a defender of a tax haven and a hotbed of sin. We need to work on our image and I am very motivated to convey to the world what our financial sector really represents.
What I told you tonight, the fields of activity and the many opportunities we are about to seize is information that our critics often don’t have - or something they simply ignore. We have to tell them who we really are and what we really do.
You, as the actors and myself, as the politician, we have to communicate, explain and respond to the lack of knowledge and denigration. We have much changed in the last years, now it is time to make sure that everybody knows.
Ladies and Gentlemen, dear friends of ABBL
The ABBL is a strong defender of the banking place. The ABBL is at the heart of our financial industry and has always been. Dear Mister Chairman Bill Contzen, your job is to fight for the interests of financial institutions and you did this with enthusiasm, expertise and a lot of effort.
The last years were not easy for an Association that represents a sector that was at the beginning of a global crisis and now should be part of the exit strategy from that crisis. The reputation of your sector, the reputation of the professionals from that sector has suffered. Now it’s the time to counteract. I repeat, now is the time to tell people outside Luxembourg that our financial sector is not a collecting basin for tax evaders. It is also time that banks are there to support an economy and not to absorb it. You have a responsibility to stimulate investments and create jobs. Take that responsibility and you have the support of the government and the Prime Minister