“There are no quick fixes,” of Luxembourg for Finance says of improving European financial market competitiveness. “But we can deepen our knowledge, we can work more closely together, we can say something as Luxembourg.” Mackel is speaking about plans for financial development agencies from across Europe to set aside their national priorities and to instead bolster financial services across the EU.
Following a memorandum of understanding signed on 9 November 2021, development agencies from Berlin Finance Initiative to Paris Europlace will meet twice a year in the EU Roundtable of Financial Centers to thrash out the issues affecting the capital markets union, but also digitalisation, sustainability, inflation and other challenges faced by financial markets.
According to Mackel, financial development agencies like Luxembourg for Finance have a unique insight on competitiveness. “We all advocate for our national markets. We go to Tokyo or Chicago, persuade firms to set up in our jurisdictions. Through this, we really get an understanding of what can make a jurisdiction attractive.”
The idea is to choose one or two topics and share them at each roundtable. “If we can come together as partners and see the issues with the same eyes, we can carry more weight,” he explains.
And the challenges are immense. On the matter of the CMU, policy makers and diplomats have been working for years to, as Mackel puts it, “get into the nooks and crannies of every country’s law, tug away at the resistances.” Some laws are mirror reflections of the national culture and changing them is tantamount to an invasion of identity. “If you take insolvency laws, for example, these are old laws, they reflect a historic business culture. Now imagine applying practices from other countries to this and then multiply that.”
The European Commission on 25 November published four new legislative proposals with a data focus, ensuring that investors have better access to company and trading data, encouraging long-term investment and making it easier and safer for investment funds to be sold cross-border. Mackel sees the roundtable’s role as a way of complementing the work that takes place at a diplomatic and federation level.
“The development institutions at the roundtable vary a great deal. Some lobby--we [Luxembourg for Finance] don’t. But what we all have in common is we can see what can be done to improve the framework in which the financial industry operates.”
Identifying problems in Luxembourg
Many of the European-wide financial market preoccupations are reflected in microcosm in Luxembourg. According to a recent survey carried out by Luxembourg for Finance, finance institutions are worried about the risk of market fragmentation and inflation, as well as more local concerns of the talent gap and housing prices. For the Luxembourg insurance industry in particular, market fragmentation is a big issue.
“Actions taken to curtail European business is a big concern of the Luxembourg insurance industry.”
Survey findings point to concerns about increasingly protectionist reactions at a national level, with almost 80% of respondents indicating concern over the growing fragmentation within the single market.
Survey participants stressed the need to overcome national action by member state authorities and rather to focus on an overall EU objective in order to overcome the loss of competitiveness currently perceived among EU financial actors on a global stage.
Asset bubbles and inflation are among the leading macroeconomic causes of concern.
“The advantage of a roundtable is that we can discuss these kinds of issues from the vantage point of different financial centres. For example, sustainable finance. Who does it well what are their plans and what more can be done?” says Mackel. “We have something to say as Luxembourg, we’re in a good position to get our partners to address the issues.”