Nearly half of all complaints received by Luxembourg’s financial supervisor CSSF came from Germany and the United Kingdom, with the Grand Duchy itself coming into third place. Luxembourg’s financial regulator received complaints from 58 countries in 2021, it said in its annual report. Total complaints received last year were up by one quarter.
German residents accounted for some 30 percent of all complaints received last year, up from 26 percent in 2021. United Kingdom-based residents accounted for 17 percent, while Luxembourg residents were responsible for 16 percent of complaints. France accounted for 9 percent while Belgium and the Netherlands both counted for 3 percent.
CSSF received a total of 1,682 complaints about Luxembourg-based financial services providers last year. That is up 25 percent from the 1,350 complaints received in 2020. Some 1317 complaints files, or 78 percent of the total, were closed last year. In 2020, 90 percent of all complaints were dealt with by the end of the year.
Complaints received in 2021 related to early repayments of mortgages, computer hacking, stolen bank cards, excessive fees charged and also asset management.
Doubts over authenticity of risk profile documents
In its annual report, CSSF described one particular case where a client accused his asset manager for not having managed his assets in his interest, with substantial losses as a result. The asset manager had placed the client’s funds in certificates of a company that went bankrupt. The client however claimed that he never signed an agreement that he was willing to change his risk profile.
CSSF said it closed this particular complaint file without concluding any misconduct by the professional. However, the CSSF said it “admitted, in its closing letter, that it could not ensure the authenticity of some documents essential for this purpose and of which the complainant challenged the authenticity.”
Three new investment firms added
The number of investment firms in Luxembourg rose to 101 in 2021 from 98 a year earlier. Six firms were authorised while three gave up their licence. Collectively, these firms employed 1903 people at the end of the year, compared to 1776 at the end of 2020. Half of the firms had fewer than 10 employees, said CSSF.
Portfolio management is the most widespread activity, the CSSF report shows. Some 83 firms provide this service. Only one new firm entered this business in 2021.
The collective balance sheet of all investment firms in Luxembourg amounted to 1.09 trillion euro at the end of 2021, down 14 percent from a year earlier. CSSF attributed this decrease to one - unnamed - firm which reduced its activities, counteracting the increase in the balance sheets of other investment service providers.
50 Luxembourg banks directly supervised by ECB
Luxembourg, at the end of 2021, was home to 50 banks that were subject to direct supervision by the European Central Bank. These either fulfil the criteria to qualify as a significant institution, or they were part of a group considered as significant. These banks represented 70.4 percent of the total assets of the Luxembourg banks, CSSF said. Out of these 50, five were banks with Luxembourg-based headquarters.
Supervision of these banks is managed by Joint Supervisory Teams, or JSTs, composed of staff members from the ECB and from the national competent authorities. At the end of 2021, the CSSF was a member of 25 JSTs for as many banking groups. Twenty-four CSSF supervisors were directly involved in this supervisory system.
In addition to the 50 ECB-supervised banks, Luxembourg was home to 74 banks that were supervised only by the CSSF.
The Supervisory Review and Evaluation Process, known as Srep, generated an average score of 2.4 for Luxembourg’s financial institutions, with all banks except one scoring 2 or 3 on the Srep scale which runs from 1 (low viability risk) to 4 (high viability risk). CSSF said the score “remained stable” compared to the 2020 assessment.
At the end of 2021, Luxembourg was home to a total of 47 depositary banks for Undertakings in Collective Investments.
CSSF to resume modernisation programme
Writing in the report’s foreword, CSSF director general Claude Marx said the authority hopes to pick up the modernisation and efficiency programme that it had started before the Covid-19 pandemic. The programme is called “CSSF 4.0” and is designed “to ensure that the CSSF is future fit and able to fulfil its dual mission, contributing to financial stability and protecting consumers and investors, in the best possible way, whilst taking into account also the ever-increasing complexity of regulation and budgetary constraints.”
“Just as supervised entities could make better use of data, the CSSF will strive to exploit data better and in a more automated way whilst applying a risk-based approach,” Marx said.