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Size of the Luxembourg banking industry: 2015 to 2018

Size of the Luxembourg Banking Industry: 2015 to 2018

Source: CSSF & BCL

Assets

Structure of banking assets (total in EUR billion and asset components in %)

  • Financial assets held for trading
  • Variable-yield securities
  • Real estate assets and other assets
  • Fixed-income security
  • Loans and advances to central banks and administrations
  • Loans and advances to customers
  • Loans and advances to credit institutions

Source: CSSF

The banking market’s asset structure has remained relatively consistent in recent years. Its overall amount has increased by EUR 22.5 billion to reach EUR 774.4 billion, while the asset breakdown has remained stable compared to the last two years.

Liabilities

Structure of banking liabilities (total in EUR billion and liabilities components in %)

  • Provisions
  • Subordinated liabilities
  • Liabilities (other than deposits) held for trading
  • Amount owed to central banks
  • Other liabilities
  • Capital and reserves
  • Debts evidenced by certificates
  • Amounts owed to credit institutions
  • Amounts owed to customers
  • Amounts owed to customers
  • Amounts owed to credit institutions
  • Debts evidenced by certificates
  • Capital and reserves
  • Other liabilities
  • Amount owed to central banks
  • Liabilities (other than deposits) held for trading
  • Subordinated liabilities
  • Provisions

Source: CSSF

Deposits from customers and credit institutions remain the main source of funding for the Luxembourg banking market.

Luxembourg has a cash-rich economy that ensures the banking sector is well funded. This has led to a funding surplus that banks cannot dissipate through lending. Deposits continue to grow despite negative interest rates being applied by some banks, increasing the central bank’s cash over the past 3 years.

Banking performance outlook

2018 banking income and expenses

Income trend (total in EUR billion and components in %)

  • Interest margin
  • Fees & commision
  • Other net revenues

Source: CSSF

The total banking income decreased slightly in 2018. The main sources of income remain commissions and interest-rate margin despite the negative interest-rate environment.

Expenses trend (total in EUR billion and components in %)

  • Other administrative expenses
  • Employee costs

Source: CSSF

Total expenses have trended upwards over the last five years. The reason for this increase varies according to the financial institution type and its respective business model. The banking performance indicators section gives a more detailed breakdown of how and why total operating costs have changed for each respective banks’ category.

It’s worth noting that the wage indexation mechanism did not have a big impact on the overall total expenses trend.

Degree of internationalization within Luxembourg’s banking industry

Explore the degree of internationalization within Luxembourg’s banking industry with our overview into the banking market.

Countries of origin: Worldwide

Below are the number and geographical origin of financial institutions from non-European countries.

Map

Source: CSSF (December 2018)

Area of origin of credit institutions in Luxembourg

  • America
  • Middle East
  • Asia & Pacific
  • Europe

Source: CSSF

Countries of origin: Europe

Below are the number and geographical origin of financial institutions from European countries.

Map

Source: CSSF (December 2018)

99 banks in Luxembourg are from Europe and 43% are from cross-border countries.

New entries and leavers in Luxembourg in 2018

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Number of credit institutions

Source: CSSF (2018)

European banks have always strongly influenced the evolution of Luxembourg’s banking market. However, the number of Chinese banks has more than doubled in five years, reaching 14 institutions by the end of 2018.

Brexit: Impact on Luxembourg

The graphs below show the number of banks and asset management companies that announced that they would relocate part of their business out of the UK following the Brexit decision. The map also highlights the target nation of the respective financial institutions.

Map

Source: STATEC, KPMG, press
(as of Apr 2019)

Breakdown of relocations by target nation

Map

Brexit: Relocation types

The below table shows the relocation methods that the 42 financial institutions would choose if they moved their main business activities to Luxembourg and/or reinforced their current activities in/from the Grand Duchy.

The uncertainty caused by Brexit drove these financial institutions to seek out a sustainable market infrastructure with a robust financial ecosystem. This transition creates new opportunities and challenges for Luxembourg, ultimately strengthening its position as one of the main European financial centers.

The analysis and classification of the relocation announcements are not set in stone as the public is still waiting for the result of the Brexit deal. However, the below picture will not change as the financial institutions’ decisions were largely made on the assumption of a hard Brexit, and all are already implementing their plans.

Type of relocation in Luxembourg

Type of relocation in Luxembourg Bank
# of institutions
Asset Management
# of institutions
Total
Opening new office Headquarters 1 7 8
Subsidiary 4 12 16
Extension of current business in Luxembourg Staff relocation 0 3 3
Booking center 1 0 1
European retail business 1 0 1
Fund management license 2 7 9
Private equity and infrastructure investment licenses 0 1 1
Depositary license 0 1 1
Not yet disclosed 0 2 2

Source: STATEC, KPMG, press
(as of Apr 2019)

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