Luxembourg investment services firms directly served 125,000 cross-border retail clients in the European Economic Area in 2022, the European Securities and Markets Authority told Delano earlier this month. The data underscores the growing importance of regulation in an expanding cross-border market.
Esma, which regulates financial markets in the EU, recently concluded an extensive on cross-border investment services in 2022.
Following this analysis, Esma told Delano that around 125,000 direct retail clients in the European Economic Area were served by 62 firms based in Luxembourg.
Esma explained that the data gathered originates solely from national competent authorities across 29 jurisdictions and specifically focuses on the number of retail clients receiving investment services from either investment firms or credit institutions on a cross-border basis.
Consequently, a Luxembourg-based fund sold in another member state by a distributor, like a local investment firm or retail bank, is not accounted for in this data set. Therefore, the figures may differ from those reported by other national bodies, such as the Association of the Luxembourg Fund Industry’s on cross-border distribution on investment funds.
Regulatory challenges amid increased cross-border services
The surge in cross-border financial services has both expanded the market and increased competition, benefiting consumers and firms alike. However, it also presents new regulatory challenges. NCAs must focus more on supervising cross-border activities and collaborate to address emerging issues, stated Esma.
According to the report, around 380 firms in the EU/EEA provided cross-border services to retail clients in 2022.
Investment firms made up the majority at 59%, while 41% were credit institutions. These firms served approximately 7.6m clients across the region.
Luxembourg in the European context
An Esma representative told Delano that Luxembourg hosted 62 firms offering cross-border investment services in 2022. These comprise 29 investment firms and 33 credit institutions.
Additionally, about 125,000 EEA retail clients were served by Luxembourg-based firms, while around 30,000 retail clients in Luxembourg received services from firms elsewhere in the EEA.
Luxembourg’s share in the EU/EEA market
Luxembourg accounts for 16% of all firms providing these services in the EU/EEA, second only to Cyprus, which holds a 23% share, Esma reported.
Firms in Cyprus, Germany and Sweden serve more than 75% of retail clients in the EU/EEA, yet Luxembourg maintains a substantial client base despite having fewer firms.
The data shows that the average number of retail clients per firm in Luxembourg is significantly lower, at around 2,000, compared to the overall EU/EEA average of 19,000 clients per firm.
Firms offering cross-border services logged approximately 5,700 complaints in 2022, although the report does not specify how many originated from Luxembourg.
It’s essential to exercise caution when interpreting country-specific figures, as Esma cited ongoing improvements in data collection methodologies and the possibility of inaccuracies in individual firms’ reporting.
Esma said that it plans to continue its data collection efforts, aiming to publish a report on the findings in 2024.