Revenue from corporate banking activities in Luxembourg has risen nearly 60 percent since 2016 to approximately 3 billion euro, according to a new study conducted by consultancy firm PWC. The consultants also found a need for the government and regulators to join the banking sector on its innovation journey in order to address regulation challenges.
PWC, in cooperation with Luxembourg banking association ABBL, surveyed about 80 percent of the entire corporate banking market in the Grand Duchy and found that respondents had total aggregate revenue of some 2.5 billion euro at the end of 2020.
“We extrapolated total revenues for the entire corporate banking sector to be approximately EUR 3.0bn - 58.8% more than in 2016,” PWC said its announcement of the results of the ABBL Corporate Banking Survey 2022.
‘Over-regulation’
Looking at challenges, PWC said it had identified “over-regulation, cybersecurity threats and the availability of key skills” as structural challenges for corporate banking in Luxembourg.
“Despite their immense growth prospects and a relatively clear assessment of what is needed to strongly position the sector at both regional and global levels, a number of structural challenges still hinder corporate banks in Luxembourg and pose a barrier to the country’s attractiveness to other EU and non-EU banks,” said Jörg Ackermann (pictured), partner at PWC Luxembourg.
“While Luxembourg’s regulatory ecosystem strongly positions it as a global hub, issues with over-regulation and cybersecurity remain to be addressed if the country is to continue to attract and maintain more global players in corporate banking,” said PWC.
Innovation needed, not only for banks
The consultancy firm said it found that a “need for greater innovation”, not only at banks, but also at government and regulatory bodies, would “help to drive this paradigm shift within the corporate banking landscape.” The survey was conducted with the support of Luxembourg For Finance and CSSF.
“The materialisation of this scenario could not only lead to increased operational efficiency, new products and services, but is set to boost Luxembourg’s overall competitiveness as a global hub for one of the most profitable banking segments,” said PWC.
‘Growing optimism’
Despite the challenges identified, PWC said it had found “growing optimism” in the corporate banking segment, as well as the increasingly wide-spread recognition of the importance of innovation and digital transformation. “Many banks are on the brink of a total transformation journey, marked by a focus on sustainability, digitalisation, and acquiring the right talent.”
PWC noted the lack of a standard definition of corporate banking and what it called “blurred lines” between corporate banking and other banking segments, such as investment banking and retail banking.
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