The six levers the Luxembourg Bankers’ Association (ABBL) outlined in its pre-election proposals include around 40 recommendations linked to talent and skills, corporate taxation, the regulatory framework, sustainable finance, digitalisation and financial education.
So what’s ABBL CEO ’s outlook, now that the government is starting to take shape?
First, the good news: the coalition of two parties, CSV and DP, “is undoubtedly good for our country because we have less friction between two parties than [among] three parties.”
But as the new government gets underway, one of the main priorities Grbic says should be addressed is the housing situation.
Long- versus short-term housing solutions
Although the major parties have recognised and have different proposals on solving this structural problem, Grbic is pushing for some short-term solutions as part of the wider strategy because, simply put: “We don’t have any time to lose right now.”
He adds: “We believe that the solution for this problem cannot only be linked to a solution offered by public investment, so we need to believe it’s going to be a mix of private and public investments to solve that problem.” The ABBL had proposed such a partnership, also to enable local corporations to build affordable housing.
As banks were part of the solution for the 2008 subprime crisis and the covid pandemic, so he reiterates they should part of the solution for the housing crisis. “Of course, banks cannot have the direct impact on that crisis because we have a tight regulatory framework in which we can give loans, and we need to respect European regulations. We have to make sure if we grant a loan that our customer will still be able to repay it.”
He adds that while he would be happy to participate with political representatives in a roundtable debate on real estate, “it would be essential that the local legislator and the regulator also participate because they need... to be able to change their approach to real estate loan activity.”
Attracting, retaining talent
Closely linked to housing is the issue of attracting and retaining talent. Grbic is in talks with the University of Luxembourg, including with people from the finance and economics master’s courses, and he sees developing the offering as “low hanging fruit... We have 80% of students that stay in Luxembourg... but it’s 80% of a small number of students. We can increase that and are also advocating for a better financial situation of the university in order to develop their offer.”
In September, Luxembourg Stock Exchange CEO was named one of the new members of the University of Luxembourg’s governing board--something Grbic applauds since “now we have one representing the financial service sector in the university”--but he hopes more will be done.
But the university is only one part of training and upskilling equation, and Grbic supports the idea of the government increasing subsidies for businesses that invest in training and to increase compensation for training-related costs.
Although Grbic thinks diversification would still allow the financial sector to benefit, for the time being it is “not in the position to replace the financial sector with something else. We should make sure that we keep the attractiveness of our sector and continue to have strong banks.”
But the bigger reflection Luxembourg should have is what growth should look like and how to find solutions to keep the financial sector intact.
“The financial sector today represents roughly one-third of the GDP of the country, we pay around 70% of direct taxes, but this economic impact is not represented in the electorate,” Grbic explains. “Only 1.4% of the voters work in the banking sector. We cannot make an impact in the voting.”