The grand-ducal regulation of 23 December 2022 on the fees to be collected by Luxembourg’s financial regulator, the Commission de surveillance du secteur financier (CSSF), revises the scale of fees that the financial market watchdog collects from supervised persons and entities.
The scale is a bit of a mishmash. The 2022 edition is 27 pages long and sets out the fees to be charged for several dozen operations, from the examination of an application for authorisation to the request for an additional investment strategy, not to mention the cost of an inspection procedure.
The articles show, among other things, that credit institutions are seeing their bills soar. For example, the cost of an application for authorisation will increase by 50% to €75,000 compared to 2021. Annual fees will increase by around 20% depending on the nationality of the institution.
Increases are also planned for investment funds. Although the rates remain lower, the rate increases can be substantial and reach 20% in certain cases.
Up to €25,000 per inspection
Among all these increases, there is an island of stability: the cost of an inspection procedure remains unchanged at €25,000 for credit institutions and €10,000 for funds, investment fund managers and professionals of the financial sector (PSF).
The proceeds of the fines also go to the CSSF’s operating budget. Last year, it represented 5% of the budget.
When asked about the evolution of these fees, the CSSF says that it “does not depend on the state budget, but that it is self-financing through fees to be collected from supervised persons and entities. This right to deduct the counterpart of its operating costs through fees from supervised actors is moreover anchored in the CSSF’s organic law.”
Concerning fee increases, the CSSF explains that “the adjustment of fees follows a certain cyclicality; namely it is reviewed, in principle, every three years. A good management of its liquidity allowed the CSSF to postpone by one year the adjustment of the fee schedule which thus did not take place in 2020, but in 2021. Taking into account the context of the covid-19 pandemic and a difficult economic environment, it was decided to adjust the fees only by 12% in 2021, knowing that a second adjustment in 2022 would be essential to cover the real operating costs of the CSSF.”
How are the increases calculated? “The adjustment of the fee schedule is based on various criteria to be taken into consideration, in particular the volume of activities of a specific category of financial actors, the technicality, complexity and level of risk of these activities.”
The CSSF insists on the fact that “the principle of proportionality applies during the tax assessment process.”
The economic environment taken into account
The changes in fees also take into account the economic environment.
If credit institutions see their contribution increase, it is because “when adapting the fee schedule in 2021, the difficult economic environment was taken into account, in particular for credit institutions, which thus saw their contribution to the CSSF’s operating costs increase to a lesser extent. The situation is different in 2022 when credit institutions benefitted from certain positive effects, in particular with interest rates going up, encouraging business plans, etc.”
And it is the same reasoning that explains a lower contribution from the funds sector, which “contributed to a greater extent when adjusting the fees in 2021 than was the case for credit institutions at that time.”
€179m operating budget
The money collected will be used for the operation of the CSSF.
For the financial year 2023, the operating costs are set at €179m. In 2022, staff costs represented 82% of the total costs. Faced with “increasingly complex and technical” supervision, the CSSF has had to recruit heavily.
“In this context, it should be noted that revenues have not grown at the same pace as expenses, as revenues depend on the number of supervised actors and the nature of the activities carried out,” says the CSSF. In fact, since 2018, the date of the last surplus year--€14.989m in profit--losses have accumulated: €4.546m in 2019; €12.503m in 2020 and €182,965 in 2021.
However, there is no risk of bankruptcy: if there is a persistent deficit, the law provides for it to be made up by the supervised entities.
This story was first published in French on Paperjam. It has been translated and edited for Delano.