Stephen Evans

“The abnormally high inelasticity of supply in relation to house prices, cannot continue without affecting the banking, financial systems and national economic system,” was the stark warning issued by the Luxembourg Centre Bank (BCL) in its latest Financial Stability Review.

The private debt funds market is growing quickly in Europe and there’s more to add, commented a panel at last week’s ALFI Global Distribution Conference. The panellists discussed the attractiveness of this sector in general, particularly to the insurance industry.

There is no evidence that banks are shifting profits to Luxembourg to dodge tax, one of the authors of a recent controversial report by the EU Tax Observatory has said. Yet if this is so, why does the think-tank label Luxembourg a “tax haven” for banks? We asked one of the report authors to explain.

“Why Luxembourg is still a tax haven” was the headline in Monday’s Luxemburger Wort, the country’s leading daily. The evidence for this statement was a report from the EU Tax Observatory think tank which identified the Grand Duchy and 16 other jurisdictions as helping multinational banks dodge taxes.

The CSSF was pleased with how Luxembourg’s fund sector withstood the acute phase of the Covid crisis, declaring itself positive about the sector’s performance on risk and liquidity, but drawing attention to some potential weak spots, in its recently published 2020 annual report.

“Risks in real estate markets were on the rise” in 2020 according to the recently-published annual report by the CSSF financial regulator. A range of indicators point to the increased level of debt across the Luxembourg economy and with it, the risks to local lenders. This has driven the CSSF to act to reduce vulnerabilities. 

Although Luxembourg decided not to “gold plate” the EU Cross-Border Distribution Directive for funds, other member states have moved to add their own local requirements when transposing the legislation. What should asset managers be looking for as these rules are rolled out?

How has pandemic affected the Luxembourg alternative fund sector? What is the shake out from Brexit? Has regulatory reform in Ireland increased competition for Luxembourg? What about crypto-asset funds? These questions and more were addressed at the “Global View on Alternative Investments 2021” webinar hosted earlier this month by US trade association NICSA in partnership with ALFI.

Of the €141bn net subscriptions into Luxembourg funds in 2020, two-thirds were attributed to sustainable funds. This compares to 44% for the rest of Europe. A recently-published survey* commissioned by ALFI gives greater insight into the ESG investing revolution.

Pressure on banks to manage costs and be more agile is felt particularly keenly by the chief financial officer (CFO). Efficiently provided financial data are key to enabling executives to operate effectively, seek operational efficiencies and increase compliance. A panel of five CFOs assembled by the ABBL discussed how they work towards this, particularly regarding their use of IT and outsourcing.