Laws and Regulations

Queen Máxima of the Netherlands has called on European financial supervisors to review financial services for their health impact and urged the banking, payments and investment industries to do more to make sure that their clients make well-informed decisions.

There has been scant divergence from EU financial sector rules in the two years since the UK left the EU. Nor are there many clear future policy proposals. Hence little has changed for Luxembourg players marketing into the UK. Could 2022 be the year when things start to shift?

Luxembourg companies from small to large are taking strides in the realm of virtual assets. This market is still under construction and regulatory and infrastructural elements are still pending. Several companies were represented at the recent Luxembourg For Finance Digital Capital Raising webinar, along with a representative of Luxembourg’s financial regulator CSSF.

Top-level European securities markets regulator ESMA (European Securities and Markets Authority) has announced it will be examining the valuation of UCITS and open-ended alternative investment funds (AIFs) across the EU.

The new corporate taxation rules from the Organisation for Economic Co-operation and Development (OECD) join earlier reforms that collectively pose economic and fiscal risks to the Luxembourg economy, according to the International Monetary Fund (IMF). Tax experts say it is possible that some non-financial multinationals located here might decide to leave because of the new OECD rules.

Unshell – the name given to the third anti tax-avoidance directive (ATAD III) – would have a “huge impact for Luxembourg, especially for Luxembourg” said Carlo Fassbinder, tax director at the Luxembourg finance ministry.

Luxembourg business representatives have said that the OECD’s Inclusive Framework Pillar One and Two corporate income tax proposals contain risks of excessive complexity, could put state tax authorities under pressure, increase the likelihood of litigation and could put competitiveness at risk.

International financial regulators, considering lessons learned from defusing systemic risks in the banking sector, have set their sights on similar risk tools to reduce the systemic risks associated with open-ended bond funds. An industry representative claims that such macroprudential tools won’t work as regulators don’t fully understand how fund management works. The markets, meanwhile, have little faith that regulators can effectively resolve this daunting conundrum.

Fund selectors are by no means in pause mode around the introduction of the next level of sustainability regulation, now that SFDR level 2 has been postponed by six months. They are busy collecting data, against a background of seemingly increasing complexity, according to responses to Fondsnieuws from chief operating officer Monique Molenaar-Vader of IBS Capital Allies and chief investment officer Kees Verbaas of Altis Investment Management.

On the last day of the year, the European Commission secretly circulated a plan to classify the fossil fuel natural gas and nuclear power as ‘sustainable’ investments. It seems the Commission will not publicly consult on this plan - the second chapter of the EU ‘taxonomy’ - while it did so three times for the first chapter, which dealt with renewable energy.