A total of 77 new entities were granted permission to operate by the country’s two financial regulators, the Luxembourg Financial Sector Supervisory Commission (CSSF) and the Supervisory Authority for the Insurance Sector (CAA) in 2021. That compares to 82 new licenses in 2020 and 119 in 2019, according to data collected by Luxembourg for Finance.
Luxembourg for Finance is a promotion body backed by the government and several trade associations. It released its annual scorecard on Monday.
Nicolas Mackel, CEO of Luxembourg for Finance, told Delano that inward interest came from a broad range of countries and regions last year. “There is no noticeable geographic trend in terms of the newly licensed entities within Luxembourg,” Mackel said shortly before the outfit published the figures. “Indeed, we see entities establishing operations in the grand duchy from across the globe, once again testifying to Luxembourg’s appeal to international financial services companies as a stable and well-established financial hub in the heart of the EU.”
The number of people employed in the financial sector rose by 3% between the second quarters of 2020 and 2021, to 51,623, the organisation reported in its annual review. That is roughly one out of every nine jobs in the grand duchy, according to Delano’s back of the envelope calculations.
Net assets under management in Luxembourg-domiciled funds grew by 18% in 2021, to nearly €5.9trn. Assets were up by 24% compared to 2019.
Assets under management in private equity and venture capital funds gained nearly 30% in 2021, “from €190 billion to €255 billion,” the report stated.
Three new management companies, six new investment firms, 41 light alternative investment fund managers and 11 new alternative investment fund managers were granted authorisation.
Sustainable finance & ESG
The grand duchy remained a leader in funds that use environmental, social and governance (ESG) criteria to screen investments. Luxembourg-based ESG funds represented 44% of the European total, at the end of June 2021, per PwC data.
The Luxembourg Green Exchange had 1,234 sustainable bonds listed at the end of December 2021, a year-on-year increase of 47%, Luxembourg for Finance reported. In October the exchange facilitated a €12bn issuance, which Luxembourg for Finance called “the largest green bond ever issued globally.” Altogether the value of sustainable bonds on the exchange rose from €246bn to €640bn last year.
Looking ahead to this year, Mackel commented: “Luxembourg has become an established centre of excellence for sustainable finance and we will undoubtedly see continued interest in this sector as global players look to leverage on the ecosystem that has been established within the grand duchy.”
One new bank started operating in the grand duchy last year, Luxembourg for Finance said. However, four left the market, leaving 124 banks in the grand duchy.
“In the private banking sector, AuM continued on the upwards trajectory seen since the end of the global financial crisis and now stands at €508 billion, marking a new compound annual growth rate of 7% since 2008,” the announcement read. Luxembourg’s private banking sector was €466bn at the end of 2020. Part, but not all, of this growth can be chalked up to Brexit.
Seven new reinsurers were licensed by the CAA, while seven companies exited. Total insurance premiums were up by 29.4% year-on-year, with life insurance premiums spiking by 42.7% during the first three quarters of the year (following a contraction of 20.8% in 2020) and non-life premiums were up by 11.9%, the agency said.
“In total, 220 financial technology firms now operate out of the grand duchy, a 10% increase on the previous year,” Luxembourg for Finance stated. CSSF records list 25 payment and electronic money institutions in the grand duchy, up from 20 in 2019.
Mackel was optimistic about the fintech sector in 2022. He told Delano that “our growing expertise in terms of digital assets could prove to be a boon for us. Already, established players in this space, such as Bitstamp, Tokeny, HQLAx, STOKR and more, form a crucial part of Luxembourg’s ecosystem, and as regulatory guidelines become more clear--[for example] the FAQ on virtual assets and blockchain from the CSSF--we could see an increasing number of players turn to us to take the lead in this space.”