Claude Marx, director general of the Luxembourg regulator CSSF on Monday met with members of parliament to discuss the impact of the pandemic on the financial sector.
“No warning signs of a financial crisis” have been detected, Marx told MPs, according to an official statement published after the meeting.
The gains of an entire year were wiped out when the World Health Organization declared the coronavirus outbreak a global pandemic last year, with assets under management in Luxembourg falling by €500m to €4.15trn.
In January 2021, they broke a record €5trn ceiling and are currently around €5.25trn, Marx told lawmakers, adding that there is no risk of a bubble in the fund industry. Funds are a good investment alternative with Luxembourg’s offer highly diversified, the CSSF chief said.
As a result of the pandemic, banks in Luxembourg by mid-2020 had received 13,000 requests for loan moratoriums worth around €3.6bn. This number is currently down to 1,600 loans worth €400m, Marx said. But not all of these were due to the coronavirus pandemic, he said.
Banking profitability, on the other hand, will be a cause of concern in the longer-term. The CSSF reports that banking costs are rising faster than their revenue, for example because of IT infrastructure investments, staff costs, but also compliance with anti-money laundering regulation and other rules.
While not a trend that is isolated to Luxembourg, the phenomenon could cause significant job losses among lenders in the country. Statec in February said around 430 banking jobs were lost in 2020 (-1.6%) despite a growing workforce in other areas of the financial sector, such as funds and insurance.
The Luxembourg bankers’ association (ABBL) in April said net earnings for the sector were down 18.1% to €3bn for 2020, losses not only due to the pandemic.
The ABBL called the trend “alarming” and warned of restructurings, mergers or even closures.
The CSSF in 2019 had warned of job losses of 20 to 30% in the long-term, around 15,000 staff, because of digitalisation and bank consolidation.