Brexit has become a major driver behind the expansion of Luxembourg's financial services sector over the past year, a new report has found.
The lobby group Luxembourg for Finance said that, during 2018, regulators in the Grand Duchy granted 80 new licenses to banks, insurers, wealth managers and investment firms, with 47 of the companies publicly announcing they were relocating some of their activities in order to cope with potential disruption from Britain’s impending departure from the European Union.
Half of these are asset managers with the remainder being a mixture of banks, insurers and payment service providers.
An important factor in Luxembourg’s continued attractiveness as an EU hub for international financial institutions is its long-term stability and AA credit rating, the lobby group said.
"Luxembourg's proposition to the global financial sector is stronger than ever. We are known as a cross-border focused centre and this status has only been underscored by Brexit. Our offer is also constantly evolving to meet the future needs of finance, which means continuing to curate a modern, ambitious and outward looking financial centre, that provides clear development plans and practical support. The progress we have made over the last year in sustainable finance, digitalisation, and in deepening relationships with global brands and major economies like China is testament to that approach" Nicolas Mackel, CEO at Luxembourg for Finance, said in a statement.
Last year, the Bank of Singapore and Banco Santander’s Brazil arrived in Luxembourg, joining the 136 banks from 28 countries that rely on the Grand Dutchy as their European or international centre for a variety of competencies, including corporate finance, wealth management, custody and other fund services.
The country’s status as a global location for funds was equally reinforced. As at 31 November 2018, Luxembourg’s fund industry accounted for EUR 4.19 trillion in assets under management (AUM), a year-on-year increase of 1.37%. With a market share in Europe of 35.9% for UCITS and 26.7% for UCITS and alternatives combined, according to figures by the European Fund and Asset Management Association (EFAMA), Luxembourg ranks as the continent’s dominant fund centre.
Deepening relationships with China
Luxembourg and China are long standing partners in the financial sector and the Grand Duchy today provides the EU hubs for seven of China’s largest banks. In 2018, Luxembourg consolidated its role as global market leader for funds investing into China, with a global market share of 29.3% of all funds investing in China, and 78.1% of all European funds investing into China.
The Luxembourg Stock Exchange has also become the world leading listing place for Dim Sum bonds, with a global market share of 23%. Bond listings increased by 34% year-on-year.
Looking ahead, Luxembourg’s role as a global fund centre is set to continue growing, buoyed in part by the intention of 23 leading international asset managers and private equity firms to move or reinforce existing activities to Luxembourg after Brexit. These include Fidelity, M&G, Aberdeen Standard Life, Columbia Threadneedle, Blackstone, T. Rowe Price and Wells Fargo.
Luxembourg for Finance (LFF) was founded in 2008 and is a public-private partnership between the Luxembourg Government and the Luxembourg Financial Industry Federation (PROFIL). Its objective is to develop Luxembourg’s financial services industry and identify new business opportunities.