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Luxembourg Banking Insights 2017

Financial Services

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Insights Megatrends Bank Rankings 2016Foreword

Acknowledgements

We would like to thank:

Pierre Gramegna, Minister of FinanceYves Maas, Luxembourg Bankers’ AssociationJulie Becker, Luxembourg Stock ExchangeToshihiko Otsuka, Rakuten

for sharing their points of view with us in this report.

We also thank the teams at the Luxemburger Wort and KPMG who have worked on this report.

Sources:- CSSF Webpage- CSSF Communique de presse

17/16- ABBL Annual Report- BCL Webpage- ECB Webpage- Annual accounts of banks- Luxemburger Wort and Press

articles

Photos:ChristopheKaraba, Luxemburger Wort Shutterstock.com

13 Approach16 Executive Summary20 Infographics24 Assets32 Profitability

39 Megatrends41 Introduction from Anne-Sophie MINALDO42 Megatrends44 Interview with Toshihiko OTSUKA52 Interview with Julie BECKER

60 Overview

59 Bank Rankings 2016

02 Foreword

12 Insights

03 Message from Pierre GRAMEGNA07 Interview with Yves MAAS11 Introduction from Stanislas CHAMBOURDON

Luxembourg Banking Insights 2017 1

Contents

Foreword

Foreword

Foreword Insights Megatrends Bank Rankings 2016


Pierre GRAMEGNA

BIO

Title: Minister of Finance

Organisation: The Government of the Grand-Duchy of Luxembourg

Website: www.mf.public.lu/

Location: City Centre

Pierre GRAMEGNA

> Mr Gramegna, you have said that London is, and should stay, Luxembourg’s first financial partner. How will this happen?

London is the most important financial centre in the world and is today our principal financial partner. It makes sense to continue this relationship by keeping strong ties between our two countries, irrespective of the results of the Brexit discussions. We will ensure that Luxembourg will continue to work closely with the British capital.

> Can we still assume that London will lose its direct and free access to the single market?

The future access of the UK to the single market will depend on how we organise the commercial relationship between the UK and the European Union. Luxembourg advocates maintaining strong economic and financial links between longstanding partners. As a preferred outcome, the Luxembourg financial centre should be able to continue to develop its business with London.

> How?There are commercial solutions. Take the Swiss actors in the market, which are outside the European Union, as will soon be the case with UK actors: Swiss banks have succeeded in being ever-present on the European market, accessing it by creating subsidiaries in Europe. The message is: there will always be the possibility of establishing a presence in Europe, and preferably in Luxembourg, to take advantage of this single market. That is the business and long-term solution. Companies will find solutions.

> In what way could a commercial relationship exist? No one knows. It could be a minimal solution, under the rules of the World Trade Organisation, or it may be something more sophisticated like the agreement between Canada and the European Union. There is an array of possibilities.

> Could you elaborate a little bit?We know that British players’ automatic and complete access to the European market will no longer be possible, but that doesn’t mean that there won’t be any access at all. There will most probably be punctual political agreements, on specific subjects. I can imagine that, in cases where British and European regulations are the same, access could be granted with regard to a given situation and under certain conditions. There are two ways of resolving this equation: companies will either set up their operations in the EU, or rely on specific agreements in given areas.

Luxembourg is a strategic partner to the UK in the upcoming negotiation process. We have a strategy that is, in my opinion, more constructive than what other financial centres do. Our message to London-based companies is not “close your banks and bring them to Luxembourg”, but rather


Pierre GRAMEGNA

“in Luxembourg, you will have a stable gateway to the EU single market, provided that your company will have substance in one or several of the sectors in which we specialise, like investment funds or private banking for example. This way, you can access the single market through your presence in Luxembourg.”

> Is Law 7024 not just a way to offer London-based banks the possibility to build a bridge with Luxembourg?

It is possible to see a link between the Brexit and this law on the softening of professional secrecy. That is not its main purpose, but it is shrewd to have made that link. Ultimately, it is important for us to have a financial centre that remains pragmatic and open to the world. We have had and will always have professional secrecy in our national law, mainly to protect sensitive data from unauthorised third party access, and this has been an asset. However, in line with changing mentalities, we decided in 2014 to embrace tax transparency.

In legal terms, in fact, we haven’t changed our laws on professional secrecy. Rather, the directives and the international treaties that Luxembourg has accepted and implemented have priority over national rules. Previous governments have refused to acknowledge these advances in order to protect banking secrecy, but we have changed this position. Professional secrecy does, and always will, exist. Yet, today information is shared among tax administrations, while the current law still prohibits sharing data within groups or among related entities. That is a complicated legal situation that needs to be resolved.

> Why?Luxembourg’s financial players face major constraints because of data. They have been obligated to treat it differently compared to the rest of their group. This has become unsustainable. We would like groups based here in Luxembourg to be able to use their data more easily within the group and also outside of it, for example if they want to send it to third party service providers. This being said, the new law will require that the necessary confidentiality continue to be ensured right up until the last link in the chain. The legislation will strike a fine balance.

> But isn’t there a risk that some banks will move abroad?

The risks are there, and I do understand them. A group can organise itself in such a way that they outsource certain operations. In parallel, like the Swiss ones do today, bank groups could decide to develop their business in Luxembourg and make it their general headquarters for the whole Eurozone, hence also doing their data processing here. However, before this is possible, the current legal obstacles will need to be removed.

> What the Swiss do today, the Brits could do tomorrow.

Absolutely.

> How does the ECB control and manage banks’ risks and data?

You have to realise that banking supervision in Europe, and indeed the rest of the world, has become a much more in-depth exercise. We have, thanks to the ECB and the banking union, an up-to-date map of the 128 systemic banks in Europe. The roles are split: the ECB looks after the 128 systemic banks, whilst the national regulators supervise the other banks. In Luxembourg, the CSSF is very much involved. As a consequence of the reinforcement of regulations, the CSSF staff has increased by 50%. The level of supervision has also increased. I have no regrets about this. We hear a number of complaints from banks. I understand them, but taxpayers expect us to make sure that the economic problems of 2007-2008 cannot be repeated.

> With the new legislation that makes tax fraud a “primary offense”, are banks and bankers complaining that they’ll be considered accomplices in such crimes?

As part of the 2017 tax reform, we have implemented a few months ahead of the European deadline a new framework on tax crimes. Tax crimes have become primary offenses of money laundering. This makes the bankers’ role indeed more delicate. But it is necessary to realise that we have a level playing field here and that we only do what other countries have to do as well.

At the same time, I will underline that the risk is heavier for Luxembourgish bankers than for European bankers, given that the European model has been in place for decades.


Nevertheless, we must follow suit. We don’t want to feature on any black lists anymore. It’s fundamental for Luxembourg to be in compliance with international standards, and doing so has already helped us a lot in the last few years. It’s true that it could be difficult for a Luxembourgish banker to adjust, compared to a French banker who has more or less complied with these rules for more years, but on the other hand we have no room. As these rules become universally enforced, the business consequences are limited. Imagine if Luxembourg had given up on banking secrecy in order to allow for exchange of information ten or twenty years ago: we would have been the only country to do so. As a consequence, Luxembourg’s attractiveness, specifically for private banking, would have plummeted. Instead of acting hastily, we have acted as it became apparent that this is an international movement in which the EU is a frontrunner.

> How have private banks, a pillar of Luxembourg’s finance sector, evolved since this time last year?

The profits of these banks have increased by 14.9%, which is a very good result considering that interest rates have been practically 0 or negative.

> The transfer participation has altered the results a little, right?

There are exceptional events, of course, but it’s a good result. For 7-8 years now we’ve lived with an interest rate that is extremely low. This brings considerable constraints that we must recognise, and I observe that the different players in Luxembourg have coped rather well.

> Are these results sector-specific?Yes. Let’s make a distinction between the different pillars in place. Private banking, for example, could have (or maybe should have) suffered more from the introduction of the automatic exchange of information. In only a few years, the value of the private banking assets has increased by 35%, which is a remarkable figure, and it is still rising. This important progression shows us that complying with the new standards did not damage us—we may even have become more attractive because of transparency.

> How do you explain this?Always by the same argument: the level playing field. It had become clear that, when we introduced the automatic exchange of information, all the other countries were going to implement it as well. Thus, there was a change in clientele: we went from being attractive to local clients, i.e. those in our neighbouring countries, and to clients with limited needs, to being attractive to clients that are further away and have much higher needs. I congratulate the banks for this transition in their business.

> What about investment funds and depository banks?

Regarding investment funds, we see a very positive tendency. The last figures show an increase in euros under management by €3.8 billion. This rise has of course been supported by a stock exchange that is in a healthy shape, but it’s not only that: our market share is still very favourable. On certain products we are growing, on others not, but in general we have an efficient and competitive regulatory framework that is conducive to growth. We have had many successes in the last two decades, and, while that is extraordinary, we have not rested on our laurels: the recently created RAIF seems to do very well; alternative funds see remarkable growth. One of the leading managers of private equity funds, EQT, has decided to move all of its funds to Luxembourg—they told me in Sweden that they want to be “onshore”. The message is that they want to be established in a fully recognised jurisdiction, in an EU Member State, i.e. not a place with a hybrid status. That’s reassuring.

> Last year, you weren’t particularly optimistic on the topic of employment. Banking employment has stayed stable, but the latest announcements suggest that the horizon is bleak.

One has to face the facts. We have more than 140 banks in Luxembourg employing thousands of employees and we know that digitalisation, FinTech, robot advisory and the like will have an impact on these figures. We must therefore prepare ourselves. We must diversify our financial sector by developing new products such as ethical investments and green bonds, and we must also emphasise FinTech. We know this will destroy jobs, while it will also create new ones.


Pierre GRAMEGNA

> Does Luxembourg intend keep its banking model?We have four pillars: private banking, funds (in which alternative funds is becoming more and more important), insurance/reinsurance, and some banks that book their corporate loan portfolios in their subsidiaries in Luxembourg. Then, we have disruptive phenomena like FinTech and inclusive finance. It’s important to see that Luxembourg’s Green Exchange is expanding into that area too. This is an important step. Even international financial institutions are beginning to expand in this area.

> What value does Luxembourg bring to private banking?

There are several points worth mentioning here. The first would be all of the infrastructure that helps enable effective management whilst minimising human intervention, i.e. passive and efficient management. The second is inclusive finance. The younger generation is enthusiastic about it. Having one of the biggest investment fund market at your doorstep, for example, is a handy selling point for prospective clients. The same thing can be said for the insurance market, with quite a number of life insurance players here in Luxembourg that use the free provision of services regime. Ultimately, there is a panoply of products for which Luxembourg is well known. Increasingly, banks do not have their own investment funds anymore, as there is a magnificent critical mass thereof in our financial centre.

> How should Luxembourgish banks respond to the influx of FinTech?

I think that each bank must develop its own strategy. Some banks only trust themselves, opting to have their own labs and engineers; they hire young people and do everything “in house”. However, this is the exception. The majority of the big players are seeking technological innovation from outside their own walls. That’s the reason why the Luxembourg House of Financial Technologies (LHoFT) was created. Like similar entities I’ve visited in Australia, Canada and Sweden, it is a hive for young people with fresh ideas and initiatives.

> Is Luxembourg well positioned for FinTech?There are three important aspects for developing FinTech. First is infrastructure, which doesn’t pose

many problems here in Luxembourg given the many investments in this area. Secondly, there must be a community of young people that invent new things. And third, they must find customers and clients. Some entrepreneurs keep to themselves and develop their businesses online, while others seek larger partners. The most valuable aspect for banks is that they have their clients’ confidence, as well as their data. If you combine those who have earned trust and data (respecting the necessary confidentiality rules) with start-ups—that’s when the magic happens. Plus, we have a regulator that applies all the applicable rules and regulations, yet knows how to listen to the sector.

> Wouldn’t it be necessary to develop a sandbox? This idea is inspired by the image of children playing in a sandbox, in order to say that one should not want to start regulating children that play games.

> To what extent are there barriers to this “game”? In Australia, for example, they set a fixed number of clients for entrepreneurs. As long as companies don’t surpass a given financial threshold, they can go unregulated. In Europe, it seems very difficult to put this in place, as the directives don’t foresee it. In Luxembourg, therefore, we don’t take this approach. Rather, we try to listen to the needs of all the actors. If someone has a particular and precise application, we are going to try and determine what directive or what part of the directive applies to it. We’re not going to ask someone with an app for payments of less than a euro to apply for a full banking licence. In Luxembourg, we cannot authorise someone to be active in the financial domain without any licence, but we can be intelligent and limit their activities appropriately.



Yves MAAS

BIO

Title: Chairman

Organisation: Luxembourg Bankers’ Association

Website: www.abbl.lu/

Location: Kirchberg

Yves MAAS

> What is happening this year in view of the 2016 bank results? Last year was not too bad on the face of it: profits were up 15%. That increase was, however, mainly the result of one bank’s divestitures, so without that one-off transaction the increase would have been only 1.5%. In the current climate, that is still acceptable but far from ideal. I think we are now looking more specifically at where we’ve been profitable in the past: half of the banks earned profits on interest, while revenues on commissions fell and costs rose. Staff costs have surged by 40% in the past decade. We have challenges to address.

> What is behind the fall in commissions?Markets played a role, as did competition driving prices downward. Customers are fewer but they are wealthier, and certainly more demanding. Additionally, margins are shrinking, which affects earnings.

> The collective bargaining agreement 2014-2017 has been extended to 2017. What’s happening next?

This transitional solution will enable the working groups to continue their discussions quietly. The current agreement dates back to the 1980s; today’s environment is completely different. The agreement needs to be updated across the board. That takes time, and we are trying to agree on temporary language. I am convinced that all involved parties will be able to build a new agreement in the interest of both the banks and their employees.

> What does the ABBL think about banks which, according to the trade unions, too easily classify employees as supervisors (cadres) who are not subject to the collective agreement?

We do not see the problem. It is up to each member to determine which employees are part of management or should be considered supervisors (cadres). I have not seen a specific case where it should have been decided differently.

> What is your take on bank employment in general?Last year we benefitted from a few growth sectors, such as investment funds. All the banking services operating in that area profited from it. Bank groups are expanding, and some have made a Luxembourg subsidiary their European hub, while others have experienced difficulties. We have to be aware of that. Some banks have hired; others have cut their work force or have left. I think we are seeing a rebalancing of the workforce. We have caught up to the global trend, but there are still challenges ahead.


Yves MAAS

> What about the bill that is currently before the Chamber on the relaxation of bank secrecy rules? Threat or opportunity?

I am in full agreement with this law. Without it there would be no level playing field in Europe. Our financial centre would lose its appeal. All those who plan to move to the Grand Duchy are asking where we are with this law which prevents us acting as we would in Paris, Frankfurt or London. To bring in new players to Luxembourg, we had to do something about the handling of bank customer data.

> For more fluidity within groups?Within groups or outside of them via outsourcing. We’ve reached a point where banks in Luxembourg are going to change their model or leverage some intra-group infrastructure to increase the efficiency of their operations. It’s a question of seeing which new players can be brought to the Grand Duchy, notably within the context of Brexit. Adjustments are being made by entities operating in Luxembourg. We have to wait and see. Because of this law, bank groups are thinking about moving some functions to Luxembourg, as it offers opportunities to work for their group from a Luxembourg base. These are operational functions, such as data systems.

> Going back to results, do you see the light at the end of the tunnel with the prospect of higher interest rates?

Rate hikes will be very gradual and will have an effect in coming years. But the simple fact of talking about it is already seen as positive for our sector. What is happening at the geopolitical level is of greater concern to us, in the United States and in other countries. Markets are very nervous, which is not a good thing for the industry.

> You don’t see Donald Trump’s election as a boon for the European financial centre?

That is very hard to say. We are watching what’s happening between the United States and the rest of the world.

The number one economic power is thinking of loosening its banking regulations. The Europeans: not at all. Here, we talk about separating banking activities or capitalization levels (Basel III and IV). Anecdotal

evidence shows that Europe is still ahead. Now, if the U.S. relaxes regulations, we’ll have to do something in the Old World in order to not lose market share.

> Are most of the new regulations behind you now?The number of regulations that have been implemented in the last ten years is staggering. Now we have to see if the results are worth it. There is a feeling among many politicians and regulators that we have reached a level that is no longer sustainable. We have to try to buoy up the level of investment in the financial sector. We are exploring what can be done to not lose our competitive edge. In a number of banks, half of all investments are linked to regulatory costs.

> What about digital banking?Everyone has a digital agenda, but there is not enough to invest in these fields. The big banks can afford it, but small businesses are already struggling to meet regulatory requirements. That harms the functionalities that need to be developed in the digital sphere.

> Are you worried about legal problems for some of your members following the criminalisation of tax evasion?

Clearly the business has changed in fundamental ways in recent years, particularly in terms of customer knowledge. With the efforts made in recent years toward greater transparency, the newly-formed customer base should save us from future problems. With that said, there may be individual cases. Every suspicion requires a declaration, but that doesn’t mean all declarations are justified. It does mean that things have become much more complicated for banks and for audit functions.

> Are you worried that the financial centre’s past will come back to haunt it?

With all that we’ve done in recent years on transparency – and it’s not unusual that in some areas we were the first to implement new standards – we have certainly reversed our image abroad, among professionals and especially among the public sector. We need to watch the road before us more than we need to look in the rear-view mirror. Our past could come back to haunt us, but we are headed in the right direction.


> The banker’s image has suffered in recent years. What can be done to reverse this?

A banker was recently elected head of state (of France), and that could be an example for other countries to follow. In Germany, the general public was asked how it perceived its bankers: 80% of those interviewed were satisfied. Then they were asked to evaluate their bank, and, here, the opinions expressed were mainly negative. It is the same thing for politicians: a local politician often has a better reputation than politicians as a whole. Banks are thought of at the industry level, not at the level of the people who work there. This is connected to the scandals of the past, which propagated a negative image. We are working to influence this image, but it is not solely up to us.

> Are you satisfied with the announcements around Brexit?

Three sectors in London are affected by Brexit: insurance, asset managers and banks – mainly investment banks. In respect of insurers, announcements have already been made, and, there, we are in pretty good shape. As for asset managers, we have seen some announcements, but I think there is a good chance of bringing more business to Luxembourg. Concerning investment banks, it’s a little more difficult, since our centre lacks this expertise. We may see certain banks locating some functions in Luxembourg. Then there are all the players on the periphery, such as regulators, clearinghouses, and rating agencies. It remains to be seen how Brexit will play out.

> What arguments are in Luxembourg’s favour?We are a stable and international financial centre. We are the leading private banking centre in the eurozone and the second largest fund centre in the world. We have an ecosystem with the necessary functions to work internationally from Luxembourg. We have a public sector that is very positive about the financial sector. The regulator tries to support business, and that is positive.

Luxembourg banking industry indicators

20142013 2015 2016

20142013 2015 2016

Number of staff

Number of banks

Cost-income ratio

Banking income

Total assets

770€ billion

6.4€ billion

5.3€ billion

12.4€ billion

10.5€ billion

49%

50%

147 141

26,060

5.5€ billion

11.5€ billion

52%

143

25,942

743€ billion

737€ billion

713€ billion

5.4€ billion

10.4€ billion

48%

144

25,785

4%

15%

0.5%

8%

3%

2%

26,237

Source: CSSF

Profit before tax and net provision




Stanislas CHAMBOURDON

BIO

Title: Head of Banking and Insurance

Company: KPMG Luxembourg

Website: www.kpmg.lu

Location: Kirchberg

Stanislas CHAMBOURDON

It was well said at the World Economic forum: “Disruption will not be a one-time event; rather, a continuous pressure to innovate that will shape customer behaviours, business models, and the long-term structure of the financial services industry.”

In recent years, numerous new regulations have been introduced with the objectives of harmonising European initiatives and of making the banking industry more stable and robust whilst minimising risks. Looking at the financial impact of MiFID 2, however, some are asking themselves whether these objectives have been achieved in the private banking sector.

A challenging and difficult economic environment has been the backdrop for the financial sector’s full technological transformation and data revolution, which is being done, of course, for the sake of client needs. The big question is whether to be a pioneer, a fast follower, or a sceptical observer. On top of that, banks must keep a close eye on data protection and cyber security.

With significant regulation- and innovation-driven changes in the midst, this edition of Banking Insights features articles and interviews from industry players: information that we hope proves useful in preparing for incoming business impacts and in placing yourself within the all-important digital transformation.

It also features a governmental perspective, with Finance Minister Pierre Gramegna and CSSF Director Claude Marx offering their points of view on Luxembourg’s and Europe’s place in today’s financial environment.

We hope you will enjoy reading this latest edition of Banking Insights!

Kind regards,

Insights

Insights


KPMG Luxembourg performs an annual analysis of the Luxembourg banking market based on statistical and annual accounts data of a selection of Luxembourg banks. The analysis takes into account industry data as stated in the reports of the CSSF, the BCL, the Luxemburger Wort and data published or made available by individual banks. Where possible, it seeks to identify from specific information published or included in the annual accounts of individual banks, those elements driving the overall trends observed in the market place.

Annual accounts reviewed for the purpose of this report are the unconsolidated annual accounts

prepared in accordance with Luxembourg legal and regulatory requirements (”LuxGAAP“) or in accordance with International Financial Reporting Standards (“IFRS”). Both these choices are available under Luxembourg banking law. Branches of foreign banks are not considered individually for this report as their annual accounts are not publicly available.

The industry overall figures are based on FINREP reporting by Luxembourg banks (in accordance with IFRS accounting principles as adopted by the European Union) and include branches of foreign banks.

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• Accompagnement patrimonial

• Transmission

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Megatrends Bank Rankings 2016Foreword Insights

Executive Summary

Size of the Luxembourg banking industry

Tota

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Num

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billi

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Num

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

156 156 152 149 147 143 141 147 144 143 141

840915 931

27,205

793 762 793735 713 737 743 770

24,75226,139 26,420 26,254 26,695 26,537 26,237 25,785 25,938 26,060

Source: CSSF

Trends observed in 2016

• Increase in number of staff for the second time in a row surpassing again 26.000 employees in total; total assets being stable since 2009 in the range of 700 million Euro and 800 million Euro

banks at 31 December 2016

141bank staff at 31 December 2016

26,060total assets of banks at 31 December 2016

€ 770 billion

Executive Summary


Source: CSSF

2016 Performance indicators

Interest margin € 4.8 billion

Commission margin € 4.6 billion

Other revenue € 3.0 billion

Banking income € 12.4 billion

5%

2%

34%

Employee costs € 3.1 billion

Other charges € 2.9 billion

Total expenses € 6.0 billion

0%

2%

11%

Banking income

Expenses

5%


• Figures in 2016 stable compared to 2015. Significant increase in other revenues and net profit before tax and provision mainly due to a one-time gain in the accounts of one bank

Net profit before provisions and taxes

€ 6.4billion

15%



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Executive Summary


• Net assets strong increase continued during 2016 leading to over 3.7 trillion net assets

sub-funds at 31 December 2016

14,595total net assets of investment funds at 31 December 2016

€ 3.7 trillion

Size of the Luxembourg investment fund industry

Total net assets

15,00012,0009,0006,0003,00001,000 4,0003,0002,0000

€ 3,506 billion

€ 3,741 billion

€ 1,856 billion

€ 2,077 billion

€ 1,576 billion

€ 1,858 billion

€ 2,220 billion

€ 2,120 billion

€ 2,414 billion

€ 2,615 billion

€ 3,128 billion

9,558

11,297

12,546

12,472

13,203

13,595

13,757

14,048

14,237

14,108

14,5952016

2015 2015

2016

2006

2007

2008

2009

2010

2011

2012

2013

2014

2006

2007

2008

2009

2010

2011

2012

2013

2014

Number of sub-funds


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Infographics

Russia

T

Israel

China

United StatesJ

Qatar

Canada

Brazil

Russia

2

Turkey

1

Israel

2

China

11

United States

6Japan

6

Qatar

3

Canada

2

Brazil

5

Number and geographical origin of Luxembourg banks

7

Andorra

2

Denmark

1

Spain

3Greece

1

Latvia

1

Liechtenstein

1

4

5

France

16 Italy

10

Switzerland

11

Sweden

7

Germany

24

Portugal

2

Ireland

2

Netherlands

3

Norway

2

Cyprus

1

Europe

103Belgium

Luxembourg

United Kingdom

International nature of the Luxembourg banking sector

Infographics


Russia

T

Israel

China

United StatesJ

Qatar

Canada

Brazil

Russia

2

Turkey

1

Israel

2

China

11

United States

6Japan

6

Qatar

3

Canada

2

Brazil

5

Number and geographical origin of Luxembourg banks

7

Andorra

2

Denmark

1

Spain

3Greece

1

Latvia

1

Liechtenstein

1

4

5

France

16 Italy

10

Switzerland

11

Sweden

7

Germany

24

Portugal

2

Ireland

2

Netherlands

3

Norway

2

Cyprus

1

Europe

103Belgium

Luxembourg

United Kingdom



Infographics

GeographyCounterparty

Banks

Public sector

Corporates

Households

377€ bn

154€ bn

54€ bn

7€ bn

69% Cross-border

31% Luxembourg

60% Cross-border

40% Luxembourg

72% Cross-border

28% Luxembourg

43% Cross-border

57% Luxembourg

Luxembourg banking sector main assets

Source: CSSF, BCL, ECB, OECD

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Assets

Evolution of assets in Luxembourg banks

0 100 200 300 400 500 600 700 800

2012

2013

2014

2015

2016

2010

2011

2012

2013

2014

€ 713 billion

€ 735 billion

€ 737 billion

€ 743 billion

€ 770 billion

Source: CSSF

Evolution of assets in Luxembourg banks

Assets


Despite low and partially negative interes rates depostis from customers increased by 28 million Euro; These inflows were used to provide loans to customers; On the asset side a switch from Loans and advances to banks to loans to central banks has occured.

Development of assets € billion Development of liabilities € billion

Loans to central banks 67 Amount owed to central banks 4

Loans and advances to banks 50 Deposits from banks 15

Loans and advances to customers 27 Deposits from customers 28

Fixed income securities 7 Debt Securities 5

Financial assets held for trading 1 Capital and reserves 4

Other assets 9 Other liabilities 1

An analysis of the top 10 banks in terms of total assets is shown in the table below:

Total assets € million Rank 2016 Rank 2015 Rank 2014

Deutsche Bank Luxembourg 1 51,787 1 80,023 1 85,537

Banque et Caisse d'Epargne de l'Etat, Luxembourg 2 43,445 3 42,797 3 41,156

Société Générale Bank & Trust 3 42,188 4 36,399 4 35,798

BGL BNP Paribas 4 33,933 5 32,969 5 31,467

Banque Internationale à Luxembourg 5 23,149 6 21,474 8 20,285

UniCredit Luxembourg 6 20,272 7 19,728 7 22,761

Intesa Sanpaolo Bank Luxembourg 7 17,996 9 16,160 14 12,928

Commerzbank Covered Finance & Covered Bond 8 17,599 8 19,676 6 23,259

Norddeutsche Landesbank 9 15,936 10 15,832 10 13,804

DZ Privatbank S.A. 10 15,914 11 15,750 13 12,950



Assets

Source: CSSF

Loans and advances to credit institutions

Loans and advances to customers

Fixed income securities

Financial assets held for trading

Other assets

50%

28%

18%

1%

3%

Asset structure has only changed slightly compared to 2015. There has been a minor shift from fixed income securities (-2%) to loans and advances to customers (+2%).

Composition of assets 2016

Asset structure


Source: BCL

2015 the Luxembourg banking sector made provisions of € 0.7 million against assets for various reason representing 10% of banks net profit before taxation and provision.

This reduction is coming from a limited number of banks and the reasons are different for each bank.

The 2016 figures are not available.

The mix of customer loans per counterparty is shown in the diagram below.

Eurozone customer loans

There has been no significant change in the loan book from previous year.

Asset quality

Non-financial corporates

Households

Other financial intermediaires

Public authorities

Insurance companies / pension schemes

47%

25%

24%

3%

1%



Assets

Source: CSSF

Liabilities to credit institutions

Customer deposits

Debt securities

Capital and reserves

Other liabilities

34%

46%

8%

8%

4%

Deposits from credit institutions and from customers remain the main fundings sources of the Luxembourg banking sector. Low and negative interest rates have not changed the relative importance of these sources compared to previous years.

Composition of liabilities 2016

Funding


Source: Luxemburger Wort

Banque et Caisse d'Epargne de l'Etat, Luxembourg

Leading banks in terms of customer deposits - 2016 Total Change

€ 28 billion

BGL BNP Paribas € 23 billion

Banque Internationale à Luxembourg € 16 billion

4%

11%

7%

ING LUXEMBOURG S.A. € 13 billion

Société Générale Bank & Trust S.A. € 13 billion

0%

15%

Customer deposits

2016 customer deposits increased by € 28 billion.

The banks with the highest deposits from customers are given in the table below.

Customer deposits

Source: ABBL Annual Report

€ 351 billion AuM



Assets


BGL BNP Paribas

Leading banks in terms of capital and reserves - 2016 Total Change

€ 5,424 million

Deutsche Bank Luxembourg € 5,031 million

Banque et Caisse d'Epargne de l'Etat, Luxembourg € 3,502 million

Société Générale Bank & Trust € 2,593 million

Intesa Sanpaolo Bank Luxembourg S.A.* € 1,857 million

Capitalisation

0%

1%

1%

37%

2%

Capitalisation

Leading banks in terms of capital and reserves are given below:

*Increase due to capital increase through the issuance of new 1,445,911 shares

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Profitability

Source: CSSF

Profitability

Expenses

€0.1 Bn

2016Profit beforetax and netprovision

2015Profit beforetax and netprovision

€0.3 Bn

Interest margin

Source: CSSF

€5.5BILLION

€6.4BILLION

Other net revenue

€0.8 Bn

Commission margin

€0.1 Bn

Significant increase in profit before tax and provision mainly resulting from an one-off gain from one bank. The diagram below illustrates the changes in net profit compared to 2015.

The diagram below illustrates the changes in net profit before tax and net provisions compared to 2015.

Overview of change in net profit compared to previous year


Source: CSSF

€0Million

€1,000Million

€2,000Million

€3,000Million

€4,000Million

€5,000Million

€6000Million

€7000Million

201420102011 2013

€3,817Million

€5,258Million

€5,379Million

€5,535Million

2015 2016

€6,361Million

€4,808Million

2012

Source: Data from CSSF Annual Report 2017

€6,4Billion

The evolution in Net profit before tax and net provisions of Luxembourg banks over the past 5 years is shown below.

An analysis of the top 10 banks in terms of net profit after tax and net provisions is shown in the table below.

Net profit

Net Income € million Rank 2016 Rank 2015 Rank 2014

Deutsche Bank Luxembourg 1 1,067 2 289 4 185

Société Générale Bank & Trust 2 310 1 406 1 610

Banque et Caisse d'Epargne de l'Etat, Luxembourg 3 240 3 230 2 219

BGL BNP Parisbas 4 185 6 152 5 176

Clearstream Banking S.A. 5 172 11 117 8 153

Nordea Bank 6 159 7 148 14 78

Intesa Sanpaolo Bank Luxembourg 7 122 4 164 7 163

State Street Bank Luxembourg 8 114 9 131 3 196

Banque Internationale à Luxembourg 9 110 8 134 6 169

ING Luxembourg 10 101 10 121 9 145



Profitability

For the purpose of this report banking income consists of income from interest , dividends, commission and other net revenues.

Net business income is defined as banking income less other net revenues.

Banking income

2016 saw a slight changes in interest and commission margin whereas other reveneus increased significantly, mainly due to a one-time gain from one bank

Banking income and net business income

Source: CSSF

48%41%

39% 39% 38%

0

2000

4000

6000

8000

10000

12000

Interest Margin (including dividends for the years 2011 to 2013)

Commission incomeOther Net Revenue (including dividends for year 2014 and 2015)

2012 2013 2014 2015 2016

14%

38%38%

21%

10,384

11,477

9,799 10,456

21%

39% 41%

12,376

25%

37%

20%


BGL BNP Paribas

Leading banks in terms of net interest margin - 2015 Total Change

€ 486 million

Banque et Caisse d'Epargne de l'Etat, Luxembourg € 365 million

Deutsche Bank Luxembourg € 306 million

Banque Internationale à Luxembourg € 299 million

Société Générale Bank & Trust € 176 million

Interest margin

5%

4%

5%

37%

5%

The leading banks generating net interest income in absolute terms are:

Interest margin




Profitability

The leading banks generating net commission income in absolute terms are:


Net commission income

Clearstream Banking S.A.

Leading banks in terms of net comission income Total Change

€ 436 million

State Street Bank Luxembourg € 358 million

Nordea Bank € 310 million

J.P. Morgan Bank Luxembourg € 268 million

Banque Internationale à Luxembourg S.A. € 185 million

Net commission income

6%

7%

15%

1%

7%


Source: CSSF

Total expenses consist of staff costs and other general administrative costs.

2016 total expenses rose by 1.2%. Staff costs remain stable in line with the development of the number of employees. Other expenses saw again an increase by 2.4%.

During 2015 and 2016 other expenses rose by more than EUR 500 million which is mainly linked to investements in new IT infrastructures to comply with new regulations.

The cost income ratio dropped by 3% to 49% which is still significantly below the average cost-income ratio for banks within the European Union which stands at 63.5%.

Total expenses

Banks 2016 2015

Cost- income ratio 49% 52%

EU average 63.5% 52.5%

Other administrative costs

Staff costs

€0Million

€2,000Million

€4,000Million

€6,000Million

2015

52%

48%

20142012 2013

53% 53% 52%

47% 47% 48%

2016

51%

49%



Profitability

Banks

Type of financial sector entity Number of staffChange in number

and %

26,060

Professionals of the Financial Sector 15,493

Management Companies

Source: CSSF Annual Report 14

4,318

1180%

1191.0%

2416.0%

2016 saw a further increase in staff numbers in all areas of the financial sector reaching in total 45.000 employees.

Development in number of staff

Source: CSSF

Number of employees as per year end Rank 2016 Rank 2015 Rank 2014

BGL BNP Paribas 1 2 478 1 2 514 1 2 594

Banque Internationale à Luxembourg 2 2 006 2 2 050 2 1 929

Banque et Caisse d'Epargne de l'Etat, Luxembourg 3 1 796 3 1 783 3 1 781

Société Générale Bank & Trust 4 1 241 5 1 244 7 1 041

DZ Privatbank 5 909 7 863 8 863

ING Luxembourg 6 838 8 818 9 802

Banque de Luxembourg 7 815 9 903 10 796

KBL European Private Bankers 8 765 10 771 5 934

State Street Bank Luxembourg S.C.A. 9 743 11 754 11 726

Banque Raiffeisen Société Coopérative 10 611 12 596 13 581

The table below shows the top 10 banks in terms of number of employees.


Megatrends

Megatrends

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Luxembourg Banking Insights 2017 41Luxembourg Banking Insights 2017 41

A marketplace under siege

Today’s financial services companies are operating in an increasingly complex environment, one where the fundamental definition of how customers experience banking is being challenged and changed. Leading companies also face competition from a myriad of non-traditional providers who threaten to disintermediate the traditional banking business model. Finally, in response to the most recent global financial crisis, banks of all sizes have been burdened with increasing regulations, a reduction in available capital, and mounting demands for skilled resources. One bank executive summarised the environment aptly: “We are operating in a marketplace under siege.”

The goal for leading banks is twofold: first, to proactively capitalise on disruption by growing market share and increasing margins; and second, to vigorously protect high-value segments and clients. Banks that are successful at both will create shareholder value and a long-term competitive advantage. While simple in concept, the path to achieving these objectives requires a keen understanding of digital disrupters and enablers, customer experience, and strategic value-drivers.

A theme that will additionally dominate boardroom discussions

and affect clients’ business models and strategies in 2018 is the shifting sands of global regulation, especially between the United Kingdom and the European Union, and the strong possibility that Brexit will fragment the scene.

Dealing with multiple regimes will entail difficult, intense, and strenuous conversations on all sides, which must occur within, and squarely address, a regulatory environment that is still gaining in opaqueness and complexity. These regulatory conversations must be kept going in 2017 for banks’ management teams to understand the impacts on their business models.

The purpose of this edition of Banking Insights is to discuss these and other current themes, including how and why:

• to embrace technology challenges as paths to innovative solutions for clients

• to rebuild trust in order to forge sustainable relationships

• to implement efficient dashboards

• to comply with stricter rules on tax transparency

• to monitor and mitigate cybersecurity risks

We hope you enjoy reading the articles and interviews in this edition, and we look forward to discussing these exciting subjects with you in the near future.

INTRO

Anne-Sophie MINALDO


Bank Rankings 2016Foreword Insights Megatrends


> PSD2, XS2A, RPA, and DLT: how customers will benefit from those abbreviations without even knowing them

We have all read statements such as recent regulatory developments, along with disruptive innovation, will lead to a significant shift in customer behaviour, expectation, and experience. What once looked like hyperbole, however, is rapidly becoming fact.

The revised Payment Service Directive (PSD2) will force banks to provide other participants in the payment ecosystem with access to customers’ payment account information (XS2A). This represents a paradigm change in the eyes of bankers, who have traditionally seen this information as amongst their most valuable assets. It is currently foreseen that the information will be shared via an application programming interface (API), i.e. a standardised interface which will become mandatory for banks through PSD2.

The vast volume of data in today’s world means that data-extraction tools are an absolute must. Though the rise of the machines is not yet upon us, banks should get used to the ideas of robot process

automation (RPA) and digital labour. The development of these technologies in recent years has made them ready—truly ready, today—to support operational processes.

Another term, distributed ledger technology (DLT), i.e. blockchain, has already become well known. DLT will increase the pace of data exchange, enabling transactions to happen in seconds instead of days. Although some bankers still regard blockchain sceptically, there are already numerous concrete use cases that make it worth keeping high on the agenda.

> In real terms

Let us now take a concrete, classic example: buying a car. Those interested in an automobile purchase know that financing is required, and in the past this would have been the starting point of a lengthy and cumbersome process that might involve trying to coordinate information and offers from different banks.

Now, however, a customer might begin by configuring the desired car on the manufacturer’s website, and then simply generating a quote from any bank that cooperates with

the manufacturer’s open API. The banks will, if consent is given to access the customer’s information, be able to perform an instant credit assessment including an analysis of the customer’s income and spending patterns.

The information obtained can then be processed by a robot-supported workflow (an example of RPA), during which time the customer’s information is also benchmarked against peer groups, enabling the bank to allocate a risk profile. The end result is a credit assessment that is executed within seconds.

Additionally, any credit request to obtain finance can be shared with other banks in order to get the best result for the customer.

Next, to onboard the customer, the preferred bank can use DLT, which will turn the once-lengthy process of completing paperwork into the simple and automated process of accessing the customer’s official identity information.

The end result: the financing is confirmed within minutes, and the customer can buy the car—perhaps without even leaving the couch.

Technology to improve customer experience

Technology to improve customer experience


€€

RPA

APIPSD2

€

1

2 34

8

9

0 2

4

5

6

7

47

8

9

0 1

3

6 5

DLT

Jürgen RiederAssociate Partner

T: +352 22 51 51 7280 E: [email protected]




Toshihiko OTSUKA

> Rakuten has a very disruptive business model. How would you define it, and how does it fit the company?

To begin with a little bit of context: Rakuten started in 1997 as purely an e-commerce company, and existed as such for the first four or five years. We went to market in 2001 right after the IT bubble burst, which was less than ideal timing for an IPO, but we succeeded.

Around the same time, we began to enhance our e-commerce proposition by strategically acquiring companies such as an online travel agency. We also began building up our FinTech portfolio by acquiring a credit card company, an online brokerage company, an e-money company, an online bank, and so forth.

Fast forward to 2017: presently, roughly half of our profit comes from e-commerce business (“e-commerce” comprising both physical items but also content like videos and e-books), and the other half from FinTech. Thus, we have built a strong combination of these businesses. The way I see it, one is the flipside of the other: every commercial transaction needs payment.

Additionally, we can leverage on our technology by offering consumer financing in the form of credit card or personal loans—or even SME loans to merchants—giving us much more extended play. As such, e-commerce and FinTech are the integral parts of our ecosystem.

> So, in effect, you have created your own ecosystem?

Exactly. This has been, I would say, the reason why we have been successful in Japan. There are also three other elements that have contributed to this ecosystem creation.

First is our brand. In 2002, Rakuten was ranked 167th in terms of national brand recognition in Japan, but then we had the unique opportunity to join the professional baseball industry. Initially there was hesitation, as baseball is quite far from the e-commerce industry—but ultimately we bought the baseball team and it ended up helping our brand a lot. We jumped in brand recognition to 19th in 2005, which significantly contributed to the growth of our ecosystem in the following years.

The second layer of the ecosystem is membership. Thanks to the growth of our brand, we have seen our membership grow to the point where we have over 100 million registered memberships, out of a total population in Japan of approximately 130 million.

Toshihiko OTSUKA

As Chief Executive Officer and Director of Rakuten Europe Bank S.A. and Rakuten Europe S.à r.l., Toshihiko OTSUKA is driving the creation of a sustainable and scalable Rakuten ecosystem business model in Europe.He brings his experience and expertise from various past leading positions, including Chief Financial Officer at Viber group, Senior Managing Director at Rakuten Bank (Japan), and Head of Accounting at Rakuten Inc.


The third layer is the loyalty programme, “Rakuten Super Points”, which is the best recognised loyalty programme in Japan, aiming to cover all the main aspects of customers’ daily lives with more than 80 business units where points can be earned and redeemed. This has significantly contributed to the increase of cross usage of our services, thereby maximising the lifetime value of the customer.

> And what about Rakuten in Europe? Are you trying to replicate all of this?

Yes. Our e-commerce business is in place and growing in Europe: we have a couple of marketplace businesses in France and Germany and also a video-on-demand streaming service called Wuaki.tv and an e-book company called Kobo in many European countries. Taking into consideration the uniqueness in each industry and country, we have separated what are global assets and what are local assets. For example, things like the Rakuten ID should be global: we are currently in the process of unifying our ID service so that you can log into any Rakuten service around the world with just a single sign-on. On the other hand, the product catalogue, for example, should be tailored for the local market, taking into consideration that market’s uniqueness.

> In this European context, do you consider banks to be your competitors?

Speaking only for Rakuten Europe Bank, I would say that banks are not necessarily our competitors, but rather I see them as potential partners. Especially in light of PSD2, I don’t see the current environment as being a head-to-head fight between banks and FinTech companies, but rather as an opportunity for various forms of partnerships. Throughout my 25+ years in the banking business, I have seen that the bundles of services banks used to enjoy have been broken up and taken on by new players which can focus very closely on one, for example, using cutting edge technology. I feel the scope and definition of banking itself is changing.

For example, banks have an essential role of taking deposits from customers, by which they maintain relationships with those customers. Banks also have KYC and AML capabilities, which should be up to the banking standard by default. I personally trust these are a part of what makes a bank a bank, which will never change—but there are many elements where new players can take part more effectively.

Looking at it from a slightly different angle, the absolute asset of banks is trust in my view. In their long history, banks have earned customers’ trust; if they had not, then of course nobody would put their money with them. Big players like Google, Apple, Facebook, and Amazon (the so-called “GAFA”) are not financial brands, and therefore the trust given to them is different from the one given to banks. The trust that banks have built up is a real asset, and together with capabilities in governance, compliance, risk management, and account services, which can ever evolve by leveraging partnerships with new players, I believe some banks can secure their own new position.

> In a European context, how do you see Rakuten evolving over the next five years?

Again, our ultimate goal is to put together the five integral elements of an ecosystem, namely e-commerce, FinTech, brand, membership, and our loyalty programme, to be able to offer very unique and lucrative offerings to our customers and merchants. Towards that goal, we will build up the momentum as a global, innovative company in the coming years.




Anti-money laundering and tax transparency, closer than ever

> On 27 April, KPMG Luxembourg hosted a conference about anti-money laundering and tax transparency. How come?

Emilien Lebas: We have recently seen change on an unprecedented scale in the financial sector. Market turmoil following the economic crisis was compounded by a tsunami of regulation that had two objectives: to fight against money laundering and against the financing

of terrorism (AML/CFT), and to gain more tax

transparency by demanding more

information from financial sector actors. The main purpose of our conference was to show how these two areas are now becoming linked more and more tightly. The success of

the conference went far beyond our expectations, which shows that this topic remains high on the agendas of many professionals in Luxembourg. It’s on the minds of compliance officers and tax experts, certainly, but also CEOs and CFOs, private bankers, and wealth planners.

Sandrine Periot: Nowadays there is absolutely no question about it: financial sector actors, and their advisors too, simply have to be concerned with the tax compliance of their clients. Tax and AML/CFT requirements have grown considerably over recent years and months, meaning more obligations and responsibilities in this area.

> Which headlines from this “regulatory tsunami” are forefront in your minds?

Emilien Lebas: One answer to this question might be the law of 23 December 2016 on implementation of the 2017 tax reform. Ever since 1 January this year, we have distinguished amongst simple tax fraud, aggravated tax fraud, and serious tax fraud (or a “tax swindle”). Whereas simple tax fraud is punishable by an administrative fine, aggravated tax fraud and serious tax fraud are criminal offences and can involve sentences of imprisonment ranging from 1 month up to 3-5 years. Tax fraud will only be “aggravated” if the amount of tax evaded exceeds certain thresholds. Finally, reprehensible acts that are committed “by the systematic use of fraudulent acts intended to conceal facts relevant to the authority or to persuade it of inaccurate facts” will constitute

Anti-money laundering and tax transparency, closer than everWe asked our experts Emilien Lebas (Associate Partner, Financial Services Tax) and Sandrine Periot (Director, AML and Forensics) to weigh in on current AML and tax transparency issues.


serious tax fraud. In the case of simple tax fraud, attempts, complicity, or facilitation in fraud are not reprehensible, whereas for aggravated tax fraud and serious tax fraud these three acts may be retained by the judge against the person. The general tax law (“Abgabenordnung”) (paragraphs 396 and 397), the law of 28 January 1948 on the fair and exact collection of registration and inheritance rights (respectively Article 29), and the law on VAT (article 80) have all been amended to include both aggravated tax fraud and serious tax fraud.

Sandrine Periot: The offence of laundering the proceeds of, or an object originating from, tax fraud

is now fully recognised in Luxembourg. More

precisely, offences of

aggravated tax fraud and serious tax fraud (committed

or attempted in the fields of direct taxes,

registration and inheritance, or value added tax [“VAT”])

have been included in the list of predicate offences designated under article 506-1 of the Criminal Code and may be penalised (1-5 years’ imprisonment and/or a fine of between €1,250-€1,250,000). Simple tax fraud does not constitute a predicate offence and is, as such, only punishable administratively.

These new provisions have been applicable since 1 January 2017. Money laundering (ML) offences derived from tax fraud will be punishable for tax fraud committed after 1 January 2017 (principle of non-retroactivity of criminal law).

It remains possible, however, for this offence to have been perpetrated in Luxembourg or abroad without the application of the minimum thresholds required by the Luxembourg law, in cases where the offence constituted a predicate offence both in Luxembourg and abroad in accordance with the principle of double incrimination.

CSSF Circular 17/650, of 17 February 2017, drafted jointly with the Financial Intelligence Unit, provides more details on the professional duties relating to tax crimes that professionals should apply.

> What is the impact for financial sector professionals?

Sandrine Periot: Professionals subject to AML/CFT obligations will now have to take account of these new primary tax offences as part of their business relationships with customers gained after 1 January 2017, but also to consider them with regard to existing customer relationships, and resident and non-resident taxpayers: this will de facto affect their professional obligations of customer due diligence. CSSF Circular 17/650 provides professionals with a (non-exhaustive) list of indicators to help them identify ML risks originating

from a tax offence; for such risks, there is an obligation to report suspicion if the integrity of the tax is in reasonable doubt. An attempt to commit a tax offence should also be considered a predicate offence.

Additional measures would, however, need to be implemented by professionals to properly address

the new requirements, such as:

• updating procedures to include tax offences

• taking into account the list of indicators in the customer’s risk assessment with a determination of which due diligence process to apply (in particular in terms of information/documentation to capture and request as well as transactional monitoring in order to allow professionals to demonstrate that the origin of the funds that are kept is not linked to a tax offence)

• performing a complete customer review and setting up priorities with a risk-based approach (for instance high-risk clients, sampling, complex structure, etc.)

• involving tax experts according to the level of risk and the complexity of the file

• raising awareness of, and performing adequate training for, employees

Anti-money laundering and tax transparency, closer than ever

Luxembourg Banking Insights 201748 Luxembourg Banking Insights 201748

> Could you elaborate on the link between AML and the FATCA and CRS regulations on the exchange of information?

Emilien Lebas: The CSSF’s new circular has

brought to light the

correlation between the

obligations of financial sector professionals regarding AML and the regulations concerning exchanges of information in tax matters. Since 2014, the Foreign Account Tax Compliance Act (FATCA) has led to the establishment of a system for the exchange of information amongst financial institutions in jurisdictions that have signed an intergovernmental agreement (IGA) with the United States regarding their US customers. The Organisation for Economic Cooperation and Development (OECD) has subsequently put in place a similar system of exchange of information on financial accounts through the common reporting standard (CRS) in order to combat tax evasion by financial account holders in more than 100 jurisdictions around the world.

Sandrine Periot: This link has always existed, although the purposes of AML and FATCA/CRS are fundamentally different: the former is the reduction of money laundering and terrorism financing risk, whereas the latter is the identification of tax evaders/fraudsters. The information that both AML and FATCA/CRS aim to obtain is usually part of the Know Your Client (KYC) process of professionals. With the introduction of tax fraud as a predicate offence to money laundering, the customer due diligence obligations of the professionals defined under the AML legislation are now extended to tax obligations. In other words, this link has been reinforced and formally recognised.

> At the conference, Chris Davidson from our UK office spoke about the future of corporate criminal offense: can you explain what it is and why it’s relevant for Luxembourg actors?

Emilien Lebas: The UK is currently in the process of developing new legislation that goes even further in the level of responsibility for actors in heritage management. From September 2017 onwards, this will have, as a main consequence, the possibility of professionals being condemned for failing to

prevent a person associated with the organisation from facilitating tax fraud. Since this upcoming legislation will have an extraterritorial effect, it is directly relevant for numerous actors of the Luxembourg market, i.e. those with a branch in the UK, or those working for UK tax-

resident clients. But, what is

more, this new

way to approach

the topic of criminal offense

in tax matters could give ideas to other jurisdictions. When an institution implements a compliance programme, the most efficient approach is often to do the exercise on the basis of the higher standard, so as to avoid having to do it again and again several times. It is thus interesting what could be next.

> How would you summarise the key take-aways of the conference?

Emilien Lebas: Confronted with these challenges, actors in the wealth planning sector in general, and especially those in the private banking industry, must be ready to comprehensively assess the risks that are associated with their


Sandrine PeriotDirector


Emilien LebasAssociate Partner


customers. Such an assessment requires extensive documentation of customers, as well as the establishment of AML procedures that ensure both a “reasonable and necessary” response in cases of suspicion of fraud from a client. It also requires that the reflection process that led to the adoption, and consequent implementation, of these procedures be recorded.

Sandrine Periot: The second key message we wanted to spread is that, ahead of this avalanche of new requirements, the obligation of professionals remains nevertheless an “obligation of means.”

Emilien Lebas: Building on this belief that tax rules and AML rules are now intimately linked and require a collaborative and coordinated approach, KPMG Luxembourg has put in place a multidisciplinary team composed of practitioners and experts to help its customers to find their way in a complex and problematic landscape with multiple dimensions. There are challenges to discuss, but also solutions, best practices, and market experience to share. We look forward to meeting our banking clients in the coming weeks and months to discuss this topic in detail.




Trust for a sustainable relationship

From regulatory challenges to sustainable development goals

One of the consequences of the waves of regulation hitting the banking industry is that bankers are finding themselves with less time to focus on their unique sale propositions. It is now a transparency-centric world, where acquiring clients’ trust and respect is on top of the agenda: in such an environment, which actions are needed to ensure sustainable growth whilst simultaneously adding value to clients, communities, and the real economy?

One solution to incoming regulatory challenges is naturally to develop new tools, in order to appease the new generation of investors (or, indeed, to appease all investors) with digital solutions and open and transparent platforms. Regulations may be a pain, but they also force banks to—for example, following MiFID 2—seek new technologies that bring value to reporting processes but also, ultimately, to customers. MiFID 2 has also obliged banks to review their client needs: does the current offering adequately

address client expectations? How big is the appetite for digital services?

Recent technological innovations have been revolutionising key areas like knowledge sharing, product and service design, renewable energy sources, distribution models, and operational efficiencies. It has also lowered market entry costs for non-traditional actors and start-ups with innovative disruptive business models.

With some income flows being significantly at risk due to the ban of inducements, which MiFID 2 reinforces, bankers have to compensate this potential loss by adding value to their clients in other ways. Ninety percent of private banking clients receiving investment advice are not directly charged for it. With the loss of some retrocession fees from the distributors, banks will have to demonstrate that investment advice comes with a cost.

> Sharing valueWe strongly believe that, through the lens of “shared value”, the private sector can identify opportunities in

addressing social and environmental challenges, and in this way offer their investors a purpose for investing.

Success without collaboration is not possible in our current economic environment. We have seen, and expect to continue seeing, new varieties of partnerships amongst governments, businesses, international financial institutions, the United Nations, and the academic world.

Investing in, financing, and insuring renewable energy and other infrastructure projects is of utmost importance, and is furthermore something that resonates with investors. This includes banks raising capital through the debt and equity markets for governments and private sector investments, and wealth managers investing to diversify portfolios and to meet demands of impact investors.

Investing savings with the purpose of contributing to sustainable development goals for the planet— it is a dream that could feasibly come true.

Trust for a sustainable relationship


• Good Governance & Rule of Law• Enabling Environment• Sustainable Financial Regulation• Incentives & Catalytic Finance• Public Private Partnership

• Private Finance for Public Investment (ie. Sovereign and Municipal Debt, Infrastructure)• Taxes

InclusiveGrowth

• Human Rights• Productivity & Taxes

• Jobs & LaborStandards

NaturalResources

• Food & Agriculture• Energy & Climate

• Water & Sanitation

Human needs& Capabilities

• Health• Education

• WomenEmpowerment

CorporateGovernance& Enabling

Environment•

•

•

•

REAL ECONOMYFINANCIAL ECONOMY

Debt, Insurance, Guarantee

SDGs

InfrastructureTechnology

Human RightsAnti-Corruption

ASSETOWNERS

PEOPLE

GOVERNMENTS

BANKS AND INSURANCES

FOUNDATIONS

COMPANIESINVESTMENTMANAGERS

INVESTMENT CHAIN

Social Investment

Corporate Investment & FDI

Portfolio InvestmentMandates

Institutional Investors

Anne-Sophie MinaldoPartner





Julie BECKER

> What is the Luxembourg Green Exchange?LGX is a unique platform entirely dedicated to green, social, and sustainable financial instruments. It was launched by the Luxembourg Stock Exchange (LuxSE) in September 2016.

The platform offers an environment where issuers of green, social, and sustainable securities can market their instruments and publish information relating to the use of proceeds, both at the start and during the lifetime of a security. At the same time, the platform caters to responsible investors by providing full and unrestricted access to a list of securities that are 100% green, social, or sustainable, together with their respective security-specific information.

Since COP21, demand for green investments has been growing rapidly. However, the risk of greenwashing threatens the integrity of the green market. As the market evolves, there is a growing need for greater transparency. The same applies to sustainable instruments blending green and social projects.

With the creation of LGX, LuxSE aims to provide issuers and investors with a dedicated infrastructure where they can post and access information relating to the security’s use of proceeds and impact in a transparent and efficient way, thus boosting investor trust and integrity in the market.

A recent LGX success has been raising €2 billion for a fund that aims to help banks in developing countries to issue green bonds to finance green projects. The market simply doesn’t propose enough green products to satisfy the demand, spelling an enormous opportunity for banks in general. In the United States, for instance, 90% of millennials’ assets under management are invested in products that meet environmental or sustainability goals.

Julie BECKER

Julie BECKER, Head of International Primary Markets and member of the Luxembourg Stock Exchange’s Executive Committee, is helping rewrite the fundamentals of green finance — with the ambition to make Luxembourg the green capital of the world. When the opportunity came along last year to launch the Luxembourg Green Exchange (LGX), a platform dedicated exclusively to green instruments, she leapt at it.


> What does LGX bring to Luxembourg?Beyond its financial success, LGX also helps build Luxembourg’s reputation worldwide. Already known as a fund hub, the Grand Duchy can also claim its place as a pillar in the sustainable ecosystem.

Our initiative also puts Luxembourg on the map as the place for sustainability-conscious entrepreneurs and other project initiators to meet investors who follow sustainable investment guidelines.

> What’s next?I am proud of and excited about how LGX is growing, but I also dream of going further. I could imagine myself developing an app that identifies every green bond that contributes to the reduction of humankind’s impact on a specific geographical zone, like the Amazon rainforest for example. Maybe one day we really will be able to illustrate and to quantify the positive effect of every single green bond in terms of how it contributes to reducing the carbon footprint.

Green bond principles

Green bond principles guide issuers on the key components issuers on the key components involved in launching a credible Green bond; they aid investors by ensuring availability of information necessary to evaluate the environmental impact of their Green bond investments; and they assist underwriters by moving the market towards standard disclosures which will facilitate transactions. In addition three banks have published a proposed Social Bond and Sustainability Bond Appendix to encourage transparency, disclosure and integrity in the development of these new markets.




Cyber security to protect your brand

Cyber security: it’s a business issue, not just an information technology issue

Cyber security is a strategic enterprise risk that goes far beyond information technology. Uncontrolled, it can severely affect product integrity, customer experience, investor confidence, operations, regulatory compliance, brand reputation, and more. That’s why cyber security demands attention not only from the chief information officer—but also from the rest of the C-Suite, the board, and, indeed, employees and business partners throughout the organisation.

> Translating cyber security into a language your business can understand Cyber security affects different parts of your business, which is why KPMG professionals translate cyber risks into an appropriate language for each. Whether we are working in your boardroom, back office, or data centre, we seek to provide a jargon-free explanation of your cyber threats, the potential impact on your critical assets, and the recommended response. We therefore provide you with a holistic view on the answers to why and from whom your organisation could be a target of a cyber attack.

> A business-led approach, supported by deep technical skills KPMG professionals know how to put cyber security into an appropriate business context because our member firms see the world from your perspective. Many of our people worked in corporate environments before becoming consultants, and we bring a combination of technical domain expertise and cross-functional business expertise, including people and change, financial management, risk management, global compliance, organisational design, and more. With that combined background, KPMG professionals understand cyber security risks in all layers of your business—not just the technology layer—so we can advise you in a context relevant to you.

> Working shoulder-to-shoulder as your approachable, attentive, strategic advisor Instead of coming to you with a preconfigured approach, KPMG professionals take the time to understand your business priorities, strategic direction, and operations. We can thus bring an appropriate context to your cyber security risks and help protect your critical business processes.

> Expertise in your industry As you navigate cyber security, it’s important to have an advisor at your side who understands the challenges, threats, and strategies in your industry. This is why, as part of bringing a business context to cyber security, KPMG also brings an industry context. Leveraging the

Cyber security to protect your brand

ORGANISED CRIMEGLOBAL, DIFFICULT TO TRACE AND PROSECUTEMotivation: Financial advantageImpact to business: Financial loss

COMPETITORSCOMPETITION OR RIVALRYMotivation: Gain business edgeImpact to business: IP theft, reputation damage

THE INSIDERINTENTIONAL OR UNINTENTIONALMotivation: Grudge, financial gainImpact to business: Distribution or destruction, theft of information, reputation loss

HACKTIVISMHACKING INSPIRED BY IDEOLOGYMotivation: Shifting allegiances – dynamic, unpredictableImpact to business: Public distribution, reputation loss

STATE-SPONSOREDESPIONAGE AND SABOTAGEMotivation: Political advantage, economic advantage, military advantageImpact to business: Disruption or destruction, theft of information, reputation loss

WHO WOULD TARGETYOU AND

WHY?


industry expertise and established market presence of KPMG member firms around the world, we understand where your industry is coming from in cyber security—and where it is going.

> Cyber security threats: a new business reality With the pace of technology, companies are becoming more and more dependent on digital information and interconnected systems among customers, employees, suppliers, and other stakeholders. But as digital information has become a new business reality, so have cyber attacks and other security compromises, which are keeping many executives awake at night.

> Have confidence that you are investing appropriately KPMG believes that the art of cyber security is about risk management, not risk elimination, and additionally that different companies have different challenges. This is why we help you understand which risks you can accept and which you can manage—based on your company’s strategy, operations, and critical assets. What kinds of threats would cause the greatest harm to your business today? What could cause harm tomorrow, based on your strategic direction? What data do you rely on for mission-critical processes? KPMG member firms bring a business lens to cyber security, helping you answer these kinds of questions and achieve a balance of data access and data protection.

> From strategy to implementation No matter where you are on the cyber security journey, KPMG can help you reach the destination: a place of confidence where you can operate without crippling disruption from a cyber security event. Working shoulder-to-shoulder with you, KPMG professionals can help you work through strategy and governance, organisational transformation, cyber defence, and cyber response. And KPMG doesn’t just recommend solutions—we also help implement them. From penetration testing and privacy strategy to access management and cultural change, KPMG can help you at every step of the way.

> Cyber security is about what you can do, not what you cannot If you’re like many organisations, your cyber fears may hold you back

from the next big thing—whether it’s entering a new market, launching a new sales channel, or interacting with customers in a new way. But at KPMG, we help you use cyber security to advance the business, not stand in the way. With the help of KPMG member firms, you can adapt to changing conditions with confidence that your digital environment is secure. It’s a path to growth and competitive advantage.

> Creating cyber resilience and self-sufficiency As your trusted advisors, KPMG professionals leave you with a thorough understanding of your organisation’s cyber security issues—along with the strategy, processes and technology to manage them—so you can replace your uncertainty with confidence that you can run bravely to new opportunities. It’s part of KPMG’s focus on sustained capability, not transactions.

Thomas Koch, GCFA, CISASenior Manager, Information Risk Management


Und

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Business Strategy

and GoalsIntelligenceAssets Regulatory

Environment

Foun

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Governance

Accountability Funding & SponsorshipPolicyOwnership

TechnologyPeople Processes

Impl

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Risk Management

Portfolio, Program and Project Management

Plan

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cont

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Compliance

Cyber security: a boardroom responsibility? Research by KPMG shows only 20% of boards worldwide take on this responsibility.

Read the full KPMG EU Cyber benchmark: http://www.kpmgcyberbenchmark.com/luxembourg




Efficient dashboards to pilot business growth

In 2016, we saw a great deal of progress in the harmonisation of regulatory initiatives across Europe by the European Central Bank (ECB). From 2017 on, we expect an acceleration of convergence which will lead to a decrease in regulatory arbitrage. The ECB has published its annual report on SSM supervisory priorities, providing useful insight on what is still coming in 2017.

The SSM supervisory main initiatives of 2016—business models and profitability, the supervisory review and evaluation process (SREP), and NPLs, BCBS239 and data quality—remain on the agenda for 2017. In addition, new areas of focus have been added, namely operational topics and measures to increase transparency. Particular attention is given to the assessment of governance, ICT risk, outsourcing strategy, and data quality for banks. These areas of focus imply that an increase of data quality and capacity is crucial for the ECB to consolidate data and check the consistency of reported information.

> SREPThe SREP approach aims to remove silos within banks and to ensure holistic bank management from business, operational, risk, capital, and liquidity perspectives. The new

supervisory approach will imply that banks are more challenged in their business strategy and profitability, and consequently their capital and risk framework adequacy. The most notable SREP development has been the introduction of the so-called Pillar 2 guidance (P2G). The capital demand resulting from the SREP now consists of two parts: the binding Pillar 2 requirement (P2R), which covers risks underestimated or not covered by Pillar 1; and P2G, which indicates to banks the adequate level of capital to be maintained. While P2G is not binding, ECB Banking Supervision certainly expects banks to comply with P2G.

> GovernanceGoing forward, the SSM expects banks’ boards to demonstrate their capacity for independent challenging and oversight of the internal governance

and control framework. Boards are also expected to be strongly involved in the validation process and monitoring of the risk appetite framework (RAF), which should define

the level of risk tolerance that the institution is willing to take in relation to both financial and non-financial risks. The RAF needs to be aligned with the business plans, strategy development, capital and liquidity planning, and remuneration schemes of financial institutions.

> Non-performing loansConsidering the continuously high numbers of non-performing loans (NPLs) among some institutions, the ECB has finalised its

comprehensive guidance on NPLs, which calls on banks to implement realistic and ambitious strategies for NPL reduction. The guidance raises not only questions regarding the level of NPLs but also governance issues, such as NPL approaches, or the separation of responsibilities or separate NPL desks. It will now form part of the ongoing day-to-day supervisory dialogue with individual banks. NPL requires alignment with IFRS 9, CRR, and IAS 39 regulations.

> OutsourcingThe number of activities outsourced by banks that seek to optimise their cost-income-ratios is increasing and, consequently, new risks are arising. As a result,

the ECB tends to focus more on the

Efficient dashboards to pilot business growth


level of control of the outsourced activities, whereas banks are more concerned about losing core banking competencies and knowledge.

The leading practice in this field should encompass the internal control organisation of major outsourcing projects with a focus on regulatory compliance, appropriate governance, risk management and the general organisation of outsourcing processes including internal control and pre/post implementation activities.

> ICT riskThe increased potential for cybercrime and the appearance of cyber terrorism, combined with the increasing reliance on outsourced ICT

services and third party products, have induced the ECB to increase their focus on supervising banks’ ICT risks. In October 2016, the EBA launched the consultation “Guidelines on Information and Communication Technology (ICT) Risk Assessment”, acknowledging the growing importance of ICT systems and hence the increasing potential adverse prudential impact from failures on an institution and on the sector as a whole. They provide guidance for institutions on how to put proper ICT governance and strategies in place as well as how to assess their ICT risk exposures and implement controls to mitigate material ICT risks.

> Data qualityIncreased transparency and more intensive supervision are boosting the amount and granularity of data required by regulators in order to monitor adherence to regulatory requirements;

to support stress testing; to answer ad-hoc information requests; to provide the raw materials for recovery and resolution

planning; to open a lens on non-bank financial channels; and to access system-wide data for macro-prudential policy purposes. All these uses of data require the accurate and timely recording of data, effective processes and reconciliation, a clear governance and ownership of data and a high degree of automation of data processes.

NPLsBusiness Strategy Operating Model

Pro�tability ICT Risk Data Quality

SREP GovernanceOutsourcing

Sonia DribekAssociate Partner, Management Consulting


www.kpmg.lu

Finally, the planets align for blockchainOut of Luxembourg comes FundsDLT, a blockchain-based product for asset managers created by KPMG, InTech, and Fundsquare.


Please visit www.fundsdlt.net to experience this new platform.

Bank Rankings 2016

2016 Bank Rankings

www.kpmg.lu

Finally, the planets align for blockchainOut of Luxembourg comes FundsDLT, a blockchain-based product for asset managers created by KPMG, InTech, and Fundsquare.


Please visit www.fundsdlt.net to experience this new platform.



Total Assets € million

Amounts owed to customers

€ million

Net interest income € million

Net fee and commission

income € million

Profit for the financial year

€ million

Own funds € million

Staff number

Bank 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 20151 Deutsche Bank Luxembourg S.A. 51 787 80 023 10 330 11 820 306 293 -92 -89 1 067 289 5 031 4 976 312 312 2 Banque et Caisse d'Epargne de l'Etat, Luxembourg 43 445 42 797 28 190 26 982 365 383 93 97 240 230 3 502 3 451 1 796 1 783 3 Société Générale Bank & Trust S.A. 42 188 36 399 12 512 10 912 176 279 139 147 310 406 2 593 2 549 1 241 1 244 4 BGL BNP Paribas S.A. 33 933 32 969 23 452 21 220 486 505 121 129 185 152 5 424 5 542 2 478 2 514 5 Banque Internationale à Luxembourg S.A. 23 149 21 476 16 129 15 019 299 285 185 173 110 134 1 080 1 023 2 006 2 050 6 UniCredit Luxembourg S.A. 20 272 20 001 4 310 3 934 106 132 20 22 36 64 1 315 1 313 169 176 7 Intesa Sanpaolo Bank Luxembourg S.A. 17 996 16 160 5 343 5 299 94 130 45 16 122 164 1 857 1 354 169 161 8 Commerzbank Covered Finance & Covered Bond S.A. 17 599 19 676 1 673 1 807 28 159 4 -1 59 79 1 031 678 15 27 9 NORD/LB Luxembourg S.A. Covered Bond Bank S.A. 15 936 15 832 3 413 3 221 90 93 -41 -23 31 32 711 700 187 182

10 DZ PRIVATBANK S.A. 15 914 15 750 8 439 8 298 77 76 125 127 11 11 629 628 909 863 11 ING LUXEMBOURG S.A. 15 188 14 941 12 769 12 723 139 159 81 75 101 121 1 121 1 012 838 818 12 Clearstream Banking S.A. 14 685 12 091 1 251 798 61 32 436 411 172 117 1 021 976 457 438 13 Banque de Luxembourg S.A. 13 415 12 924 11 080 11 351 66 68 185 155 63 69 673 666 815 803 14 J.P. Morgan Bank Luxembourg S.A. 12 868 11 537 11 575 10 395 34 13 268 271 63 69 1 124 1 022 403 492 15 HSBC Private Bank (Luxembourg) S.A. 9 243 5 322 1 368 1 248 2 13 7 9 0 2 405 176 107 109 16 KBL European Private Bankers S.A. 8 952 8 983 3 901 4 311 48 60 61 69 29 87 1 330 1 144 765 771 17 Pictet & Cie (Europe) S.A. 8 650 7 174 6 934 5 905 54 40 181 217 82 113 394 332 297 524 18 Skandinaviska Enskilda Banken S.A. 8 005 3 252 3 097 2 846 11 14 25 31 15 21 206 205 202 197 19 Banque Raiffeisen Société Coopérative 7 501 7 223 6 312 6 057 92 92 20 20 17 18 345 300 611 596 20 Industrial and Commercial Bank of China (Europe) S.A., en abrégé ICBC (Europe) S.A. 7 353 7 497 1 740 1 983 74 84 23 31 28 16 554 538 351 312 21 Crédit Suisse (Luxembourg) S.A. 7 162 6 786 6 253 5 282 39 31 91 98 -8 12 319 303 438 434 22 MEDIOBANCA INTERNATIONAL (LUXEMBOURG) S.A. 6 282 4 993 869 988 30 28 1 8 19 24 289 265 9 9 23 Nordea Bank S.A. 5 606 5 103 3 625 4 535 22 37 310 269 159 148 455 567 497 462 24 Banque Privée Edmond de Rothschild Europe S.A. 5 423 5 547 4 947 5 130 15 8 76 90 14 16 167 181 495 510 25 DekaBank Deutsche Girozentrale Luxembourg S.A. 4 922 5 721 3 986 3 869 77 76 66 71 78 68 528 521 394 399 26 Mitsubishi UFJ Global Custody S.A. 4 779 3 333 3 130 1 887 21 7 50 47 21 12 140 123 176 164 27 Nomura Bank (Luxembourg) S.A. 4 113 5 186 2 740 3 731 5 5 77 82 32 42 444 400 372 350 28 UniCredit International Bank (Luxembourg) S.A. 3 649 3 790 1 226 1 326 8 11 0 0 4 5 283 275 15 15 29 Natixis Private Bank International S.A. 3 498 3 552 536 1 564 13 18 11 9 5 2 837 836 116 111 30 The Bank of New York Mellon (Luxembourg) S.A. 3 459 4 117 2 491 3 483 6 -2 37 38 27 23 201 38 231 232 31 Bank of China (Luxembourg) S.A. 3 452 2 689 1 828 1 707 28 24 17 6 5 4 418 215 130 98 32 DNB Luxembourg S.A. 3 397 3 152 2 415 2 008 21 15 5 5 10 8 98 89 43 40 33 Banco Bradesco Europa S.A. 3 220 4 598 372 632 30 23 10 12 26 22 452 394 41 39 34 ABN Amro Bank (Luxembourg) S.A. 3 088 2 938 2 059 2 080 20 21 16 17 -4 5 203 205 125 130 35 Eurobank Private Bank Luxembourg S.A. 2 680 3 924 1 289 1 220 25 25 6 6 12 12 283 291 93 99 36 Banque Degroof Petercam Luxembourg S.A. 2 671 2 929 2 263 2 517 11 13 71 91 61 61 149 232 311 317 37 Fideuram Bank (Luxembourg) S.A. 2 495 2 676 2 175 2 374 1 1 35 35 23 21 113 110 61 62 38 UBI Banca International S.A. 1 927 2 703 1 702 1 569 12 11 11 11 -11 -2 100 101 88 87 39 John Deere Bank S.A. 1 840 1 927 0 0 64 64 1 2 32 32 259 282 142 139 40 Danske Bank International S.A. 1 459 1 397 1 053 989 15 15 19 21 9 18 177 157 93 92

Overview




€ million



income € million


€ million


Staff number

Bank 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 20151 Deutsche Bank Luxembourg S.A. 51 787 80 023 10 330 11 820 306 293 -92 -89 1 067 289 5 031 4 976 312 312 2 Banque et Caisse d'Epargne de l'Etat, Luxembourg 43 445 42 797 28 190 26 982 365 383 93 97 240 230 3 502 3 451 1 796 1 783 3 Société Générale Bank & Trust S.A. 42 188 36 399 12 512 10 912 176 279 139 147 310 406 2 593 2 549 1 241 1 244 4 BGL BNP Paribas S.A. 33 933 32 969 23 452 21 220 486 505 121 129 185 152 5 424 5 542 2 478 2 514 5 Banque Internationale à Luxembourg S.A. 23 149 21 476 16 129 15 019 299 285 185 173 110 134 1 080 1 023 2 006 2 050 6 UniCredit Luxembourg S.A. 20 272 20 001 4 310 3 934 106 132 20 22 36 64 1 315 1 313 169 176 7 Intesa Sanpaolo Bank Luxembourg S.A. 17 996 16 160 5 343 5 299 94 130 45 16 122 164 1 857 1 354 169 161 8 Commerzbank Covered Finance & Covered Bond S.A. 17 599 19 676 1 673 1 807 28 159 4 -1 59 79 1 031 678 15 27 9 NORD/LB Luxembourg S.A. Covered Bond Bank S.A. 15 936 15 832 3 413 3 221 90 93 -41 -23 31 32 711 700 187 182

10 DZ PRIVATBANK S.A. 15 914 15 750 8 439 8 298 77 76 125 127 11 11 629 628 909 863 11 ING LUXEMBOURG S.A. 15 188 14 941 12 769 12 723 139 159 81 75 101 121 1 121 1 012 838 818 12 Clearstream Banking S.A. 14 685 12 091 1 251 798 61 32 436 411 172 117 1 021 976 457 438 13 Banque de Luxembourg S.A. 13 415 12 924 11 080 11 351 66 68 185 155 63 69 673 666 815 803 14 J.P. Morgan Bank Luxembourg S.A. 12 868 11 537 11 575 10 395 34 13 268 271 63 69 1 124 1 022 403 492 15 HSBC Private Bank (Luxembourg) S.A. 9 243 5 322 1 368 1 248 2 13 7 9 0 2 405 176 107 109 16 KBL European Private Bankers S.A. 8 952 8 983 3 901 4 311 48 60 61 69 29 87 1 330 1 144 765 771 17 Pictet & Cie (Europe) S.A. 8 650 7 174 6 934 5 905 54 40 181 217 82 113 394 332 297 524 18 Skandinaviska Enskilda Banken S.A. 8 005 3 252 3 097 2 846 11 14 25 31 15 21 206 205 202 197 19 Banque Raiffeisen Société Coopérative 7 501 7 223 6 312 6 057 92 92 20 20 17 18 345 300 611 596 20 Industrial and Commercial Bank of China (Europe) S.A., en abrégé ICBC (Europe) S.A. 7 353 7 497 1 740 1 983 74 84 23 31 28 16 554 538 351 312 21 Crédit Suisse (Luxembourg) S.A. 7 162 6 786 6 253 5 282 39 31 91 98 -8 12 319 303 438 434 22 MEDIOBANCA INTERNATIONAL (LUXEMBOURG) S.A. 6 282 4 993 869 988 30 28 1 8 19 24 289 265 9 9 23 Nordea Bank S.A. 5 606 5 103 3 625 4 535 22 37 310 269 159 148 455 567 497 462 24 Banque Privée Edmond de Rothschild Europe S.A. 5 423 5 547 4 947 5 130 15 8 76 90 14 16 167 181 495 510 25 DekaBank Deutsche Girozentrale Luxembourg S.A. 4 922 5 721 3 986 3 869 77 76 66 71 78 68 528 521 394 399 26 Mitsubishi UFJ Global Custody S.A. 4 779 3 333 3 130 1 887 21 7 50 47 21 12 140 123 176 164 27 Nomura Bank (Luxembourg) S.A. 4 113 5 186 2 740 3 731 5 5 77 82 32 42 444 400 372 350 28 UniCredit International Bank (Luxembourg) S.A. 3 649 3 790 1 226 1 326 8 11 0 0 4 5 283 275 15 15 29 Natixis Private Bank International S.A. 3 498 3 552 536 1 564 13 18 11 9 5 2 837 836 116 111 30 The Bank of New York Mellon (Luxembourg) S.A. 3 459 4 117 2 491 3 483 6 -2 37 38 27 23 201 38 231 232 31 Bank of China (Luxembourg) S.A. 3 452 2 689 1 828 1 707 28 24 17 6 5 4 418 215 130 98 32 DNB Luxembourg S.A. 3 397 3 152 2 415 2 008 21 15 5 5 10 8 98 89 43 40 33 Banco Bradesco Europa S.A. 3 220 4 598 372 632 30 23 10 12 26 22 452 394 41 39 34 ABN Amro Bank (Luxembourg) S.A. 3 088 2 938 2 059 2 080 20 21 16 17 -4 5 203 205 125 130 35 Eurobank Private Bank Luxembourg S.A. 2 680 3 924 1 289 1 220 25 25 6 6 12 12 283 291 93 99 36 Banque Degroof Petercam Luxembourg S.A. 2 671 2 929 2 263 2 517 11 13 71 91 61 61 149 232 311 317 37 Fideuram Bank (Luxembourg) S.A. 2 495 2 676 2 175 2 374 1 1 35 35 23 21 113 110 61 62 38 UBI Banca International S.A. 1 927 2 703 1 702 1 569 12 11 11 11 -11 -2 100 101 88 87 39 John Deere Bank S.A. 1 840 1 927 0 0 64 64 1 2 32 32 259 282 142 139 40 Danske Bank International S.A. 1 459 1 397 1 053 989 15 15 19 21 9 18 177 157 93 92





€ million



income € million


€ million


Staff number

Bank 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 201541 M.M. Warburg & CO Luxembourg S.A. 1 287 1 344 1 240 1 295 5 4 17 19 4 5 33 33 168 136 42 VP Bank (Luxembourg) S.A. 1 268 1 365 656 825 5 7 10 13 6 2 143 140 92 100 43 Advanzia Bank S.A. 1 234 906 1 102 792 133 111 5 6 40 36 79 65 120 99 44 EFG Bank (Luxembourg) S.A. 1 228 1 491 968 1 011 6 4 18 19 -2 2 55 57 104 103 45 Danieli Banking Corporation S.A. 1 148 1 112 88 73 9 13 0 0 16 65 1 027 962 7 6 46 Banca Popolare dell'Emilia Romagna (Europe) International S.A. 1 110 1 077 900 756 4 3 2 2 1 0 48 47 18 18 47 Mizuho Trust & Banking (Luxembourg) SA 1 011 998 270 313 2 1 28 25 -2 -5 58 62 134 123 48 HSH Nordbank Securities S.A. 909 902 24 24 3 4 4 4 2 8 199 191 48 58 49 Bank GPB International S.A. 831 195 388 111 9 1 5 2 0 -6 117 72 32 17 50 China Construction Bank (Europe) S.A. 810 331 229 26 7 3 2 0 -10 -8 193 201 123 101 51 Sal. Oppenheim jr. & Cie Luxembourg S.A. 752 827 583 665 1 1 14 16 -18 -33 111 144 86 91 52 DEPFA Pfandbrief Bank International S.A 721 2 426 211 719 -3 -2 0 0 23 -23 123 147 12 14 53 State Street Bank Luxembourg S.C.A. 711 584 89 64 -1 51 358 335 114 131 476 345 743 754 54 Union Bancaire Privée (Europe) S.A. 672 1 140 308 852 1 1 29 35 18 19 165 145 31 30 55 SMBC Nikko Bank (Luxembourg) S.A. 646 748 489 603 1 1 12 10 2 0 127 127 80 81 56 Banque BCP S.A. 593 564 261 228 9 8 4 4 0 1 38 37 76 74 57 Delen Private Bank Luxembourg S.A. 510 659 350 512 -1 0 58 60 42 47 46 41 47 48 58 Banque de Patrimoines Privés S.A. 475 486 348 345 3 3 8 14 6 8 46 38 63 46 59 TD Bank International S.A. 450 407 421 376 2 2 3 4 -4 -1 23 24 38 37 60 Credem International (Lux) S.A. 421 301 219 113 1 1 31 27 20 17 146 139 28 27 61 Banque Hapoalim (Luxembourg) S.A. 390 534 5 15 0 0 2 2 -3 -3 55 59 20 21 62 Banque Carnegie Luxembourg S.A. 386 404 344 366 3 3 7 8 4 5 24 24 39 40 63 Banque Havilland Institutional Services S.A. 305 422 270 320 0 4 4 5 2 3 24 75 27 31 64 Sumitomo Mitsui Trust Bank (Luxembourg) S.A. 303 231 0 0 0 1 5 5 1 1 43 40 22 21 65 Fortuna Banque s.c. 245 249 221 225 3 3 1 0 0 0 11 11 23 22 66 ABLV Bank Luxembourg S.A. 183 119 154 99 2 1 2 1 1 -2 14 16 20 22 67 Banque Puilaetco Dewaay Luxembourg S.A. 162 139 143 113 0 0 10 12 1 4 15 19 28 27 68 Banque Öhman S.A. 99 97 85 83 1 1 6 5 0 0 10 10 29 29 69 Brown Brothers Harriman (Luxembourg) S.C.A. 97 91 0 0 0 0 130 105 48 34 49 48 382 359 70 Société Générale Financing and Distribution S.A. 24 29 0 0 1 2 3 7 2 8 21 20 6 5 71 Rakuten Europe Bank S.A. 20 6 3 0 0 0 0 0 -7 -4 15 3 N/A N/A


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