Claude Marx, head of Luxembourg’s financial supervisor CSSF, has issued a clear warning to the financial sector: Europe’s banks and asset managers area falling behind in the race to adopt artificial intelligence. “We are facing an economic revolution and we should embrace it,” he said. The speed of transformation, he warned, is “unheard of”, and so is the speed of falling behind.
Marx, who has led Luxembourg’s top financial supervisory authority since 2016, said traditional banks and asset managers that fail to integrate AI and other digital tools risk being left behind by faster, more efficient competitors. “Traditional banks that don’t embrace AI and other technologies like distributed ledger technology will likely have a limited lifespan,” he cautioned, pointing to widening gaps in performance, efficiency and cost control.
He was speaking at the recent Bloomberg Luxembourg Investment Summit, where other industry leaders echoed his message, stressing that technological adaptation has become an existential issue for Europe’s financial sector. Speakers including Edmond de Rothschild’s Yves Stein, Lhoft’s Nasir Zubairi and Amundi’s Charaf El-Hami underlined that the challenge is as much cultural as technological, and that leadership will be key to driving innovation across the financial centre.
“Traditional banks that don’t embrace AI and other technologies like distributed ledger technology will likely have a limited lifespan.”
According to a joint survey by the CSSF and the Central Bank of Luxembourg, published in May, only half of the respondents currently use or plan to use AI. Less than a third, 28 percent, said they have concrete use cases in production or development, while 22 percent are experimenting with AI technologies.
Limited adoption
For now, the five main areas of AI use are information search and summarisation, process automation, chatbots and virtual assistants, text generation and translation. Marx noted that banking applications will increasingly include fraud detection, credit decisions, risk management and customer service, while in asset management AI will support portfolio management and asset allocation. Agentic AI will bring even more tools in the future.
But the picture is not all rosy. Half of the surveyed firms still have no AI plans for the next twelve months. “76 percent of financial entities have defined a digital strategy that covers technologies like AI, distributed ledger technology, crypto-assets and tokenisation,” said Marx. “That means one-quarter of the surveyed firms do not have a digital strategy – a finding I find worrying.”
Shift in mindset
A broader change in attitude toward adopting AI and other innovative technologies is still needed. “Tech has been the backbone of finance for decades,” said Nasir Zubairi, chief executive of the Luxembourg House of Financial Technology (Lhoft). “Banks, financial institutions and investment funds all have to get better at technology.”
AI is not just a matter for the IT department. “Managing innovation is an oxymoron,” said Yves Stein, chief executive of Edmond de Rothschild (Europe) and chairman of the Luxembourg Bankers’ Association (ABBL). He argued that mindsets must shift and that spaces for exchanging innovative ideas need to be created. “Banks must equip themselves in order not to become obsolete,” he said.
Attracting tech talent
Regulation, culture and talent attraction remain major challenges. Top university graduates are increasingly choosing big tech over banking, Zubairi observed. Marx agreed, highlighting the need to strengthen governance and bring tech-savvy experts onto the boards and into the executive ranks of financial firms.
The financial sector, Zubairi added, needs to attract professionals who understand the full innovation cycle. “It’s not necessarily about the technology itself, but how to use technology to drive a company forward.” He pointed to the pharmaceutical industry as an example, which has successfully integrated tech leadership.
Different profiles will be crucial to drive the financial industry forward. “Leaders of the future need to inspire in terms of technology,” said Charaf El-Hami, global head of data management at Amundi. “They must connect data and business needs, leverage innovation and help put AI strategies in place.”
Businesses must change their mindset, Zubairi argued. “There needs to be a reframing so that tech is not sidelined, but seen as a core element of a financial player’s strategic future.” Besides death and taxes, he added, change is the third inevitability in life. “And if we don’t adopt AI, we will lose.”
Vulnerabilities
Risks remain, including bias, discrimination, data privacy, reliance on external solutions, and the use of AI to facilitate cyber and financial crime. The Basel-based Financial Stability Board (FSB) recently warned that the rapid adoption of AI could amplify vulnerabilities in the financial system. Does that mean bespoke regulation is needed?
For Marx, the answer is an emphatic no. The European Union already has the AI Act, which entered into force earlier this year, and existing financial frameworks cover many of the same risks. “We should monitor the adequacy of the existing framework in the coming months and years,” he said, “bearing in mind two challenges: the speed of AI change and adoption, and the lack of AI usage data in the financial sector.”