As the Eurozone’s second leading financial center according to the latest Global Financial Centres Index, Luxembourg has maintained a strong grasp on its position as a global hub of financiers in the face of rapidly changing regulations. Serge de Cillia, CEO & Head of Management Board of Association des Banques et Banquiers Luxembourg (ABBL), tells us how Luxembourg banks will need to focus on developing their future talent if they want to keep up with how new technology is changing banking products and services.
How would you qualify Luxembourg’s banking climate in comparison with its peers in Europe?
Our strength lies in coming up with tailor-made and internationally compliant cross-border solutions and products, all mixed up with internationally recognized know-how. Consequently, a lot of international clients, making investments all over the globe, find reliable partners in Luxembourg. Another advantage is that most of the banks in Luxembourg have a parent company in other countries. Many Luxembourg banks are hence part of international networks and can receive the support from their headquarters. Luxembourg entities are very often competence centres, be it in banking, investment funds or support activities. That, obviously, helps the headquarters when the client in the US bank wants a European solution.
How has Luxembourg navigated through increased regulations?
Since 2008, the banking industry has had to cope with a tremendous amount of regulations. One of them was certainly the implementation of different standards of Automatic Exchange of Information (AEOI). On the one hand, we had the European rules and directives; on the other hand, we had the OECD reporting rules, as well as the US rules, like FATCA. Regarding the AEOI, Luxembourg has moved very quickly. Banks with the support of the Luxembourg Bankers’ Association co-operated closely with national and international authorities in order to be ready and comply with regulations as soon as they have come into force. Together with the Luxembourg Banking Regulator CSSF we assess private banking and asset management developments on a yearly basis. The sector continued to develop positively over the past decade, as demonstrated by the increase of assets under management from 300 billion euros in 2007 to 361 billion euros at the end of 2016. This confirms that the banking industry has been able to reinvent itself by adapting to the regulatory shift toward tax transparency and to successfully targeting the global market.
To what extent do you think this new regulation may impact Luxembourg competitiveness as an international hub?
Luxembourg has managed to consolidate its position as the Eurozone’s second leading financial centre after Frankfurt, according to the latest Global Financial Centres Index. The Luxembourg financial centre was able to maintain the prominent position for the fourth consecutive year. Furthermore, Luxembourg remains the only European financial centre likely to become more significant in the future. This is confirmed by the latest IMD World Talent Ranking 2017 that ranks Luxembourg 1st in the EU and 4th worldwide for attracting foreign talent.
How is Luxembourg driving digital transformation and how is ABBL supporting FinTech innovation?
No doubt, the banking sector is undergoing a digital transformation. The banks of our children are not the banks that you are entering inside, but the banks operating on your smartphone. There will be more consequences to come, especially social consequences. In the future, we are going to need less staff, whilst the client will be asking for more services. The client will not go into a bank, but wants to have all the necessary information and transaction possibilities in the application of his smartphone. No matter where he is, at the beach, in the office or his backyard, he will be able to get in contact with the bank. Tomorrow’s competitors are not solely other banks, but other service solution providers.
FinTech will continue to drive the change of the banking business. This is not only the case for the banking and the financial service industry, but also the case for commerce in general and other industries. The Luxembourg Banking Association keeps its members up to date on this upcoming evolution. Furthermore, the ABBL has created the Digital Banking and FinTech Innovation Cluster (DBFI). The cluster’s objectives are to inform our respective stakeholders, train our members staff and establish contacts in a growing FinTech network.
What are some key points of your agenda?
We have three missions. We provide services to our members, manage relations, and represent the employers. The Luxembourg Bankers’ Association, via its technical committees and working groups, provides technical and strategic input for the benefit of its members and the Luxembourg financial industry as a whole. As such, it acts as a center of competence and as a platform for the exchange of ideas. The ABBL also develops professional recommendations and guidelines for its members, including a code of conduct. Through the House of Training (HoT), the ABBL, in collaboration with the Luxembourg Chamber of Commerce, also provides training programmes adapted to the needs of banks. These include professional development programs of different levels, accelerated language courses, seminar programs on a range of subjects and professional banking training courses aimed at various levels of qualification and international levels.
How do you see the future of banking?
All banks need to be innovative, especially on the production side regarding structure and the cost of financial products. If we are not competitive, we need to make readjustments. Innovation is key and it is essentially based on technology and competence. Therefore, banks need trained people and training is not just learning something once for many years to follow. Lifelong learning has become the new standard. Innovation and quality are key elements to survival.