By H.E. Pierre-Louis Lorenz, Ambassador of Luxembourg to The Netherlands.
Over the course of the last three decades, Luxembourg has been able to build a financial industry which is uniquely specialized in cross-border activities. This is a common feature throughout the entire range of services provided in Luxembourg, whether in investment funds, wealth management, capital market operations or advisory services. Enabling investors to connect with different markets is today the centre’s hallmark.
The country has developed cross-border products and services in a variety of sectors including banking, investment funds, wealth management, insurance and capital markets, offering a high degree of complementarity to other financial centres that predominantly serve domestic markets. Its multijurisdictional expertise, the diversity of its financial services ecosystem and its high degree of stability have helped the Luxembourg financial centre flourish, while delivering benefits to households, companies and governments across Europe and beyond.
The success of the Luxembourg financial industry has not only been a national asset, but benefited Europe more generally. Luxembourg’s leading position in the investment fund area is foremost a success story of a European investment product, the UCITS. The assets raised in the fund industry through Luxembourg are assets that benefit companies all over Europe as they are being reinvested in various countries and help finance economic activity.
Luxembourg has grown economically with the completion of the Single Market of the European Union where goods, people, services and capital can move freely. This Single Market has encouraged trade and thus ensured growth. It is therefore imperative not only to preserve it but also to continue to work for its completion.
The economic and financial crisis and lately Brexit, as well as the growing awareness of former practices in international financial engineering as revealed by successive international campaigns like Bahamas’ Leaks, LuxLeaks, SwissLeaks, Panama Papers and others have been contributing to a change in attitudes and the need to adapt the world of financial services, notably in the regulatory sphere and in matters of tax transparency. Luxembourg is unequivocally committed to tax transparency and has embraced this evolution. The government has abolished banking secrecy in tax matters and supported or even, during Luxembourg’s recent EU Presidency in 2015, pushed for automatic exchange of information.
Today transparency is welcomed as an opportunity for Luxembourg. Its financial industry, notably in the investment fund area, capital markets and many other activities, grew to a global role without being covered by banking secrecy. Its wealth management industry has risen to prominence for its unique expertise and lately even came to suffer from the undeserved stigma of tax secrecy.
The attractiveness of Luxembourg as a hub in the EU has been recognized by many leading international financial institutions over the last years. It is the ideal location from where to operate, whether in the Eurozone or more generally in the EU as a whole. Going forward, Luxembourg will spare no effort in enhancing its overall competitiveness.
Like other financial centres, Luxembourg’s aim is to remain competitive, and to do so it must contend with two major forces: globalisation and technology.
With this in mind, Luxembourg set out a vision for the financial centre, called LuxFin 2020, built around three principal objectives:
Consolidate and develop Luxembourg’s expertise in cross-border financial services. Luxembourg will continue to serve corporate and private clients, whether EU or non-EU, in need of specialist high quality international financial services and compliant cross-border investment solutions. Luxembourg will enlarge its geographical scope beyond the European Union’s borders in serving international clients around the world.
Expand Luxembourg’s role as the European location of choice for global financial services providers. Asset managers, private equity firms, banks, insurance companies, payment institutions and many other financial services professionals have chosen Luxembourg to set up their pan-European operations and to have a strong foothold in the Eurozone. To encourage this development, Luxembourg, which is firmly rooted within and strongly committed to the European Union, will enhance its attractiveness as the EU onshore location of choice for international investors and financial institutions.
Foster innovation and become a leader in digital financial services. By seizing the opportunities of digitalisation and leveraging technological enablers, the financial services industry in Luxembourg is committed to stay at the vanguard of innovation. This process is accelerating very rapidly and it could very well be the start of a new era in financial services. The FinTech revolution brings about immense opportunities and Luxembourg very firmly aims to position itself as a 21st century financial center. It is already solidly established in this space with global e-payments institutions as well as new, disruptive players such as virtual currency operators having chosen Luxembourg as their hub in Europe.
Luxembourg has the capacity and motivation, once more, to turn challenges into opportunities and to reinvent the way to approach and offer financial services. This makes me confident about the future of our flagship service industry.
