Luxembourg support PSF body seeking international standards

Jean-François Terminaux is chairman of the industry association Finance & Technology Luxembourg and managing director of Damovo Luxembourg, an ICT services provider. Photo: Guy Wolff/Maison Moderne

Jean-François Terminaux is chairman of the industry association Finance & Technology Luxembourg and managing director of Damovo Luxembourg, an ICT services provider. Photo: Guy Wolff/Maison Moderne

Jean-François Terminaux of Finance & Technology Luxembourg says the trade group is in the process of creating the world’s first international standards for support PSFs, which could be put in place this autumn.

Finance & Technology Luxembourg (previously the Association of Support PFSs) is developing international standards that it hopes will make the grand duchy’s support PSFs more marketable abroad and reduce the regulatory burden on financial firms.

In 2003, Luxembourg’s financial regulator, the CSSF, introduced the professionals of the financial sector regime (usually known by its French acronym, PSF). Support PSFs are authorised to handle operational tasks, such as managing IT systems or sending documentation to clients. They employ nearly 9,000 staff in the grand duchy, according to the CSSF’s most recent figures.

According to Jean-François Terminaux, Finance & Technology Luxembourg’s chairman, the industry’s reputation has not extended far outside the grand duchy. International standards could help change this. And, he said in an exclusive interview, the association wants the insurance sector to be more involved in setting the rules for its members, which so far have focused more on the banking and funds sectors. The interview has been edited for length and clarity.

Aaron Grunwald: For people who don’t know, what is Finance & Technology Luxembourg?

Jean-François TerminauxJean-François Terminaux: We are here to be a clear partner, to discuss with the regulator, to discuss with the ministry of finance, and to see how we can improve things in the regulatory area.

Do you only have support PSFs or do you also have specialised PSFs as members?

No, it’s support PFSs, not specialised. There’s another association for that.... We are representing around three-quarters of the support PFS in Luxembourg.

We are working to change the agreement [editor’s note: authorisation system] and to make it more modern and linked to the market. Don’t forget that the PFS status was [introduced] in 2002. You can imagine that the market has changed a lot and the situation is totally different.

How much have the requirements from Luxembourg’s financial regulator, the CSSF, changed since 2002?

Hugely, not only because of the CSSF. That’s why things are changing. The CSSF is the regulator for Luxembourg, but they have to follow European regulation, and sometimes more than than the European regulations....

[Back in the 2000s] support PFSs were an idea from the CSSF, not because of banking secrecy--everybody thinks that was the main [point]--but it was it was clearly because at the time of outsourcing some parts of the business, [there was a question of] what can be the impact on the core business if you outsource part of your process to an IT company or to printing company or to someone else, and if they fail, what will be the impact?

We were clearly early in this area, in Luxembourg. That’s good for us. That’s good for the market, but [today] we need to know how to change things in terms of the [licensing system].... Is it an agreement only for Luxembourg and Luxembourgish players? Four years ago [we started this] discussion in our association.

What did your members say?

We discovered four main topics and one of these topics was how to provide this support PFS status outside Luxembourg. In Luxembourg, normally people know [what the support PSF authorisation is], but outside Luxembourg it’s important to show what we have built over the last nearly 20 years now, and the knowledge we have, the processes we have, the professionalism that we have. One of the other really important topics that we discovered is how to bring the local regulation to something more international. Just to explain abroad, what is a support PFS? And so, we have worked with a huge team of people--who really know more about all these topics than me--and we decided last year that we will go to an ISAE 3000 standard. Why? Because it’s a kind of a basket, and you can put a lot of topics in. So you can build your own standard, I’m saying it like that, but it’s internationally recognised....

The idea of the standard is not to cancel the regulator’s circulars, it’s not. Because the circulars are the circulars. But the idea is to simplify the work of our members, simplify the work of the auditors and simplify the work of the CSSF. Let me explain. If [the work of obtaining the ISEA certification already] fullfills 70% or 80% of what the CSSF circulars require, then you just have to work on the 20% on top. Also the CSSF just has to do a [bespoke review of the remaining 20%].

It’s less work for people.... You know, for some companies, it’s a lot, a lot, a lot of documents. Different documents for the same questions that you have to fill, because it’s always the same questions. Different formats, but it’s always the same questions. The idea is to really simplify the work. If you simplify the work, everybody is happy. Then you could also show [that you are following international standards].

So the standards would not replace the license from the CSSF?

No, not at all... the [license] and standards are different. The [license] is something that you have received from the regulators, [while standards are] a reference.

[These days there is] more and more regulation, more and more rules to follow. Luxembourg is a small country with a certain amount of people, so you have to find a way to be clever and ensure that you follow the rules, but if you can save time, and I hope somehow money, it will help everybody.

So this is a voluntary standard with the objective to make it simpler to comply with the CSSF’s banking and investment fund rules, and with the European Banking Authority and other regulators?

To make it simpler for everybody, all players, regulators, auditors, our customers.

But we also want to extend [the scope], which is possible with an ISEA 3000. Why not insurance tomorow? Insurers are using support PFSs, but they’re not regulating by the [insurance regulator] Commissariat aux Assurances, they’re regulated by the CSSF. So we are also in discussion with [the insurance industry association] Aca and with the CAA to ask ‘what are your needs?’, [which could then be included in the international standard. That would] increase the market, not only the financial sector regulated by the CSSF, but also insurance and maybe tomorrow someone else, I don’t know.

When do you think that the standards could be published and take effect?

Okay, my goal--Jean-Francois is speaking [laughs]--end of June.

The end of June?

Yes. That’s the idea. The idea is to be surely ready for September.

The final version?


I think that if we make the decision in March on the results of the RFP, I hope that, fingers crossed, the company [that will draft the official standards for the association] will be selected. They can go quite fast, because this company knows how ISEA 3000s work.... That’s why I said end of June, and fingers crossed we can present the results [to] the CSSF, the HCPF [High Committee of the Financial Centre] and ministry of finance during summer time, and then say, okay, let’s go in September or October.

Correction: A previous version of this interview listed the incorrect international standardisation label. Also corrected the year that PSFs were introduced. Further clarified that PSF is the French acronym; these service providers are known as support PFSs in English.