Luxembourg banks want to work together to create common standards on certain compliance-related functions, a survey by the Luxembourg Bankers’ Association ABBL among its member showed. 93% of respondents said they see such cooperation as ‘valuable for the financial services community’.
Regulatory reporting and client onboarding are seen as the most attractive areas for the so-called ‘mutualisation of functions’ (see chart below). A majority of respondents also is in favour of cooperation in the field of cybersecurity.
The main advantages in setting up separate hubs to provide services that are currently provided internally are cost savings, improved quality of the specific business function in question and the possibility to better focus on core areas of their business, according to the ABBL.
Do you support mutualisation of the following functions?
The survey respondents regard Luxembourg as particularly well placed to set up compliance-related hubs because of its IT infrastructure (67%) and the presence of a suitable project partners (59%), such as technology providers, law firms and consulting companies. However, there aren’t any concrete mutualisation initiatives operating in the Grand Duchy as of yet. A working group of the Haut Comité de la place financière, an organisation set up by Luxembourg’s finance ministry that is tasked with safeguarding the viability of Luxembourg as a financial centre, is currently studying the topic.
Fund selection
ABBL’s survey did not touch on mutualisation concerning the selection of investment products. According to Rob Sanders, co-founder of the consultancy Door, banks also have great appetite for the standardisation of due diligence questionnaires. Sanders developed a standardised digital questionnaire that fund buyers can use to perform due diligence on funds. This questionnaire is to replace the bespoke questionnaires banks traditionally use to select and monitor third-party investment funds.
“With Door, banks can compare managers side-by-side in due diligence, increase transparency and lower risk”, says Sanders. Currently, 300 buy-side manager research teams, 39 of which are retail and private banks are using Door’s standardised questionnaire.
According to the firm, about 80 asset managers are working with Door, including 65% of the top 50 cross border brands. So far, over 2,500 due diligence requests have been already serviced on Door, says Brand.