Private banks in Luxembourg have seen their assets under management double since the 2007-8 financial crisis, according to a survey conducted by KPMG and the Luxembourg Bankers’ Association (ABBL). The report observed that growth at Luxembourg’s private banks in 2020 outpaced growth at their counterparts in Switzerland.
Private banks held 508 billion euro in assets at the end of 2020, up 9 percent from 466 billion euro a year earlier and more than double the 225 billion euro held at the end of 2008.
By comparison, growth in Swiss private banking assets slowed significantly in 2020, to 3 percent, KPMG said, citing “a lack of performance growth”. Switzerland nevertheless remains Europe’s main domicile for private banks, the KPMG report said. Its private banks held 2,943 billion in assets at the end of 2020, compared with 2,862 billion a year earlier and still more than five times as much than its counterparts in Luxembourg.
KPMG attributed the boost for Luxembourg’s private banks to a number of factors. Private banks have accelerated their transformation after the introduction of the exchange of taxpayer information in Europe several years ago. Brexit led some UK-based private banks, including JP Morgan and Citibank, to move to Luxembourg.
What’s more, the Covid-19 crisis has reinforced Luxembourg’s status as “stable and trustworthy safe haven,” said KPMG. And finally, the favorable situation in financial markets also contributed to the increase in total assets.
KPMG confident Luxembourg will remain competitive
“There is in Luxembourg a real breath of fresh air that will certainly sustain the competitiveness of the market to put the country even further at the center of the private banking world map,” said Jean-Pascal Nepper, Partner, Head of Banking & Insurance at KPMG Luxembourg, in a press release.
Large financial institutions are responsible for the bulk of the growth in assets under management. The large banks accounted for approximately 90 percent of the increase, said KPMG, referring to combined effects of organic growth and ongoing consolidation among private banks. The largest private banks represented about 47 percent of the total at the end of 2020, while small banks accounted for 9 percent.
Foreign players keen to enter
The KPMG report said it expects further consolidation in private banking in Luxembourg. “We expect to continue observing players from nearby countries, mainly Switzerland, entering and consolidating the Luxembourg private banking market. Further, certain other global players with an inorganic growth appetite, from e.g. Southern Europe as well as North and South America, will keep sounding out the current opportunities,” it said.
The increasing importance of Luxembourg as a global hub for investment funds also contributed to growth in private banking, said KPMG. It said that Luxembourg has become the largest domicile for investment funds in Europe with in excess of 5,500 billion euro in assets under management.