Luxembourg - the international hub for financial services

Luxembourg, THE international hub for financial services

By Fernand Grulms

CEOLuxembourg for Finance

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Financial services made in Luxembourg

• Leading investment fund centre in Europe

• Leading wealth management centre in the Eurozone

2Source: EFAMA, Luxembourg Bankers’ Association

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Financial services made in Luxembourg

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Law firms

Audit,Tax

Banks,Other financial Intermediaries,

Insurance

44,000

ICT

Other

27,00045 % of GDP(= 16 BIO EUR)

Luxembourg is one of the mostcompetitive economies in Europe….

and in the World !

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International competitiveness indicators

Name of Index SourceLuxembourg

rankingNumber of

participants

Growth

environment scoreGoldman Sachs 1 170

Global competitiveness

IndexIMD Lausanne 5 55

International Business costs

KPMG 5 121

Index of Economic Freedom

Heritage Foundation 8 157

Safest city in the world

Mercer Human Resources Consulting

1 215

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Luxembourg’s economy

• Above all service economy (81% of GDP income)

• Good quality of life

• High standard of living

GDP growth Luxembourg versus EU (15)

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Luxembourg, a solid base

• Large number of European institutions

• Headquarter of Arcelor-Mittal (world largest steel producer)

• Headquarter of SES (world leader in global satellite

communications)

• RTL Group World Headquarters (Multimedia)

• Cargolux Headquarters (Best All-Cargo Airline 2008)

• European Headquarters Amazon, Apple

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Luxembourg, an international platform

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Luxembourg, an international platform

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Luxembourg, an international platform

Direct investment inflows OECD countries (2006)

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Luxembourg, an international platform

Direct investment outflows OECD countries (2006)

The institutional framework

1) EU legislation (directives)– European passport (Home country control)

• Banks• Insurance & reinsurance• Investment service providers• Investment funds• Pension funds

– Without european passport• Cross-border allowed but host country must approve

(if provided to retail customers)• Examples

o Venture capital & private equityo Real estateo Securitisation

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The institutional framework

2) BIS rules

3) IOSCO rules

4) IAIS principles

5) FATF recommandations

6) OECD recommandations

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Institutional organisation

Minister for the Treasury

Commission for the supervision of the financial sector

InsuranceCommission

Luxembourg central bank

Macro supervisionSystemic risk

LiquidityPayment systems

BanksFinancial intermediaries

Securities markets

Investment fundsPension fundsOther vehicles

Life insuranceP & C insurance

ReinsuranceCaptives

Pension funds

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The financial centre today

• 154 Banks

• > 250 other professional intermediaries (asset managers, brokers, transfer agents…)

• > 3,000 Investment funds

• 188 asset management companies for collective investments

• 54 Life insurance companies

• 37 P&C insurance companies

• 262 reinsurance captives

• 1 direct reinsurer (Swiss Re for EU business)

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Other service providers today

Professional service providers have great know-how on structuring international financial transactions

– Business & tax lawyers, notaries – Auditors, consultants, accounting firms– EDP providers (software & hardware)

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Origin of banks in Luxembourg

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Free provision of services in the EU

Germany 55Austria 29Belgium 55Bulgaria 5Cyprus 10Denmark 33Spain 45Estonia 11Finland 28France 57Gibraltar 2Greece 29Hungary 12Ireland 28Iceland 5Italy 45Latvia 11Liechtenstein 2Lithuania 11Malta 9Norway 13Netherlands 44Poland 15Portugal 30Czech Republic 12Romania 5United Kingdom 45Slovakia 12Slovenia 11Sweden 27Total notifications 696Banks concerned 75

Luxembourg banks providing services

in the EUCountry

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Cross-border finance: insurance

Life Crossborder

83.9%

LifeLuxembourg

4.4%

Non lifecrossborder

6.3%

Non LifeLuxembourg

5.4%

Source: Commissariat aux Assurances 2007

Total: € 12.44 billions

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Life insurance: origin of premiums

Source: Commissariat aux Assurances 2007

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Luxembourg a sound financial centreSolvency ratio since 1990

0

5

10

15

20

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Weighted average

8.9 10.3 11.2 11.5 12.1 12.6 12.5 12.4 12.4 13.3 12 12.7 14.3 16.5 16.5 15.2 14.7 14.5

The world’s most sound banking systems:(7.0 = healthy, with sound balance sheets)

1.Canada – 6.8

2.Sweden – 6.7

3.Luxembourg – 6.7

4.Australia – 6.7

5.Denmark – 6.7

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« The financial system remains sound, resilient to potential adverse shocks and well supervised »

Latest IMF report

Luxembourg a sound financial centre

Luxembourg Stock ExchangeStrong listing activity

Leading position for international bonds

Quotation lines(as at 31 January 2009)

Bonds 32,570EUR 19,554Others 13,016

Warrants 7,735

Shares 289Domestic 38Foreign 251

UCIs 8,182Domestic 8,015Foreign 167

Total 48,776

Quotation lines(as at 31 January 2009)

Bonds 32,570EUR 19,554Others 13,016

Warrants 7,735

Shares 289Domestic 38Foreign 251

UCIs 8,182Domestic 8,015Foreign 167

Total 48,776

3,700 Issuers (100 countries, and 13 supranationals are represented on the exchange)

• Leading exchange for listing GDRs in the world

• In total 222 GDRs listed

• Primarily issued by companies based in Asia, more particularly from India

Leader for GDRs (Global Depositary Receipts)

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Luxembourg Stock ExchangeStrong listing activity

Leading position for international bonds

Quotation lines(as at 31 January 2009)

Bonds 32,570EUR 19,554Others 13,016

Warrants 7,735

Shares 289Domestic 38Foreign 251

UCIs 8,182Domestic 8,015Foreign 167

Total 48,776

Quotation lines(as at 31 January 2009)

Bonds 32,570EUR 19,554Others 13,016

Warrants 7,735

Shares 289Domestic 38Foreign 251

UCIs 8,182Domestic 8,015Foreign 167

Total 48,776• In second place behind the NYSE and ahead of

London in the quotation of depositary receipts

• In total 221 GDRs listed as at December 31, 2008

• Primarily issued by companies based in Asia, more particularly from India

Leader for GDRs (Global Depositary Receipts)

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Dublin25%

Bourse deLuxembourg

46%DeutscheBörse 11%

London10%

Euronext5%

Others 3%

Strategic re-positioning

Year2,000Year2,000

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Main areas of competence

• Investment funds• Private banking & wealth management• Insurance & reinsurance• Corporate finance • Pension funds• Securitisation vehicles• Venture capital & private equity vehicles• Real estate structures

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Net assets of Luxembourg domiciled UCIs

The Luxembourg investment fund sector

Strong development after UCITS I

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

2 200

2 400

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

€ billions

August 081 917.993

Growth rate12 months: -5.76%

YTD: -6.87%

Figures as at August 31, 2008 Source: CSSF

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The Luxembourg investment fund sector

… at a glance:

• > 3 000 investment funds

• > 11 000 fund units

• almost 2 000 billion euros of assets under management

• more than 32 000 distribution agreements for Luxembourg retail funds (“UCITS”)

Figures as at May 2008 – Source: CSSF

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The Luxembourg investment fund sector

Figures as at May 2008 – Source: CSSF

Market shares (%) of promoters of Luxembourg domiciled funds by country of origin in terms of assets under management

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European fund industry

UCITS & NON-UCITS

CountryAssets

€ millionsMarketShare

Luxembourg 1 895 400 25.7

France 1 443 900 19.6

Germany 989 500 13.4

Ireland (1) 806 300 10.9

United Kingdom 645 400 8.7

Italy 323 300 4.4

Spain 260 200 3.5

Switzerland 161 200 2.2

Austria 153 200 2.1

Belgium (2) 126 500 1.7

Others 575 600 7.8Total 7 380 500 100.0

UCITS

CountryAssets

€ millionsMarketShare

Luxembourg 1 661 600 29.1

France 1 295 900 22.7

Ireland (1) 651 400 11.4

United Kingdom 554 800 9.7

Italy 254 900 4.5

Spain 250 400 4.4

Germany 235 600 4.1

Belgium (2) 120 400 2.1

Sweden 120 100 2.1

Switzerland 119 600 2.1

Others 439 500 7.7Total 5 704 200 100.0

Figures: March 2008Source: EFAMA

(1) Data as at end February, 2008(2) Data as at end 2007

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The top 16 countries of distribution outside the European Union

Target countryLuxembourg fund

registrationsSwitzerland 2 390

Norway 1 022

Singapore 874

Hong Kong 802

Bahrain 641

Liechtenstein 504

Taiwan 463

Macao 398

Chile 344

Jersey 303

South Korea 300

Iceland 206

Guernsey 185

Gibraltar 143

Lebanon 94

Trinidad & Tobago 74

Others 402

Total registrations 9 145

Sources : Lipper Hindsight 31/12/2006, PWC Global Fund Distribution 2007

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The Luxembourg investment fund sector

Profile of Luxembourg investment funds

KEY CRITERIA UCITS Non-UCITS SIF SICARInvestment restrictions

(eligible assets)High Medium Low Medium - High

Risk diversification High Medium Low None

Ease of public

distributionHigh Medium Low Low

Degree of investor protector

High High Low Medium

Degree of supervisor

High High Low Medium

Time to establish Low - Medium Medium - High Very low Low

Target investors All AllInstitutional /

HNWIInstitutional /

HNWI

Luxembourg12%

B, F, D46%

Other EU16%

Latin AmericaUSASIAMiddle East…

26%

Largest private banking in the Eurozone

Private Banking AuM au Luxembourg300 BIO EUR

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Private equity & venture capital (SICAR)

• Those who have used it:– AXA (largest insurance company in the world)– Credit Suisse (global infrastructure vehicle)– Deutsche Bank (Spanish real estate, Dubai projects)– KKR

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Captive reinsurance

Industrial company

Direct insurer

Professional reinsurer

Insurance premiums

reinsurance premiums

Captive

reinsurance premiums

Insurance premiums

(« The excess » )

participation

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Country of origin of mother-company

Source: Commissariat aux Assurances 2007

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Economic sector of mother company

Source: Commissariat aux Assurances 2007

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Origin of premiums 2007Total amount = 3 BIO Euro

Source: Commissariat aux Assurances 2007

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Conclusion

• Luxembourg is international

• Luxembourg is diversified

• Luxembourg is well regulated

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Thank-you

www.luxembourgforfinance.lu