Could the coronavirus crisis prove to be a blessing in disguise for the financial industry in Luxembourg? It seems to have accelerated the adoption of new technologies in a sector that is traditionally somewhat resistant to innovation, and offers fresh opportunities to cut costs.
‘Thanks to the Covid crisis we have accelerated a lot of technological reforms,’ Societé Générale’s Luxembourg country head Arnaud Jacquemin told a webinar with the ambitious title ‘The Future of Financial Services’ organised by the Luxembourg House of Financial Technology (LHoFT) last Friday.
The crisis forced the French bank to speed up its move to complete paperless working, and introduced fully digital interaction with both clients and regulators for the first time ever, Jacquemin added. ‘And we’ve also seen a further acceleration in digital banking, which has become a more and more obvious solution for our clients.’
CSSF flexibility
‘Although Covid was a tragic episode, we have taken some positive things out of this experience too’, Eduardo Gramuglia de Pallavicino (pictured) chimed in. ‘This crisis has shown how much we can achieve in a very short time if we really want it,’ said State Street’s Luxembourg country head.
Though perhaps not quite as material, some technological progress was also made at State Street too, says Gramuglia. ‘When we did videoconferencing before the pandemic, not everybody switched on the camera. Now everybody does.’
Another positive change as a consequence of the coronavirus pandemic that Gramuglia hopes will turn out to be permanent was the flexible, responsive attitude of the CSSF. ‘The regulator has been very flexible in their handling of the crisis by [temporarily] relaxing reporting requirements and easing deadlines. Recently they said they had been fearful to make these changes, but I really hope this new attitude is here to stay,’ said the State Street head. ‘We’re going to see a new circular this month that will hopefully give us some clarifications and we are looking forward to that.’
Chance to cut costs
The virus also provides a welcome opportunity to speed up cost-cutting efforts, something that private banks continue to struggle with according to a recent McKinsey report. Working from home having become part of the ‘new normal’ allows banks to cut back on staff travel costs and possibly also on office rent.
‘Given the low-interest rate environment, we need to make sure we have the financial means to continue our job and become more profitable,’ noted Jacquemin. ‘This is a complicated balance to find.’ But the pandemic may indeed help.
But there’s always the risk of falling back to old habits when life starts to show signs of ‘normality’ again, Jacquemin and Gramuglia both warned. ‘We want to keep the agility in our organisation that we developed during the crisis’, said Jacquemin. ‘But we need to inject this into the DNA of the organisation.’ This will be a challenge for private banks and regulators alike.