Nicolas Mackel, CEO of Luxembourg for Finance, an economic development agency backed by the state and several industry associations, discusses the challenges of developing Luxembourg as a financial centre ahead of the organisation’s 15th anniversary next month. Photo: Matic Zorman/Maison Moderne

Nicolas Mackel, CEO of Luxembourg for Finance, an economic development agency backed by the state and several industry associations, discusses the challenges of developing Luxembourg as a financial centre ahead of the organisation’s 15th anniversary next month. Photo: Matic Zorman/Maison Moderne

The economic development agency Luxembourg for Finance (LFF) will celebrate its 15th anniversary in February. Its CEO, Nicolas Mackel, lists the challenges facing his organisation and the financial centre.

Benoît Theunissen: How would you sum up the 15 years of LFF’s existence?

: Rather than drawing up a balance sheet, we prefer to see what the next five years will be like. The world has changed so much in the last three years alone that it doesn’t make much sense to take stock of the last 15 years. Especially since LFF only exists through what Luxembourg can offer.

So how successful is Luxembourg as a financial centre?

Employment in the financial sector has increased steadily over the last 10 years. Over this period, the financial centre has grown by almost 2% per year, with more than 63,000 people working there today. The sector contributes almost 75% of corporate and municipal tax revenues respectively. The financial industry’s contribution to GDP has fallen slightly, but is still around 25%.

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How do you go about promoting something as intangible as the financial centre?

What we promote is the financial ecosystem that exists in Luxembourg. If I take the example of Brexit, the main argument for bringing players to Luxembourg was precisely the existence of this ecosystem. If we managed to bring in more asset managers and private bankers, it is because of this ecosystem, which is adequately equipped to support these activities.

This ecosystem is made up of professionals and authorities who know their business, as well as a regulatory framework created to support these activities. You can promote it as a whole. So we promote the benefits of this ecosystem as a whole.

And how do you go about developing the marketplace?

LFF is not the only player contributing to the development of the Luxembourg financial centre. It is mainly at the top, through the High Level Committee of the Financial Sector [Haut Comité de la place financière]--in which we participate--that things happen, thanks to the contribution of several players who have something to contribute and who work together in a series of working groups.

For example, the Raif [reserved alternative investment fund] is a product of the High Level Committee of the Financial Sector. ‘Luxembourg Inc’ shows that players can be competitors on a daily basis, but still work together for the common good.

The local financial ecosystem is quite extensive, represented by numerous organisations segmented by industry and by theme. How does this affect your mission?

We cover the entire financial industry. So we are sector agnostic. We cover fintech as well as sustainable finance, private equity, insurance and payments. We might sometimes have the impression that there are a few too many players to do this. However, this is not something that bothers us in our work. We have to look positively at this multitude of actors who give off a lot of energy. Moreover, when a specific sector develops very well, it also develops particular needs which are then dealt with in forums that are entirely dedicated to them. The main thing is that the whole ecosystem should be in dialogue. The High Level Committee of the Financial Sector ensures a certain convergence in this respect.

We look at the interests of the Luxembourg market as a whole.
Nicolas Mackel

Nicolas MackelCEOLuxembourg for Finance

What is LFF’s role in the ecosystem?

We act as a link between the public and private sectors, and we are agnostic of the interests of any individual sector. We look at the interests of the Luxembourg marketplace as a whole. Although the trend within the financial industry is towards alternative assets, we are currently observing other equally important trends simultaneously. Our role is to ensure that our financial centre is diversified.

We are studying, for example, which banks, which insurers, which payment companies we can try to attract to Luxembourg. Also, everyone is rushing to the United States. For our part, we also go to Vietnam, India, Indonesia and Brazil. Our role is to analyse trends and opportunities in the medium and long term.

Which strategic markets do you focus on?

Our main markets are Western Europe with Switzerland and the UK, North America and Asia with an interest in South Korea, Japan and China. Emerging markets such as India and Vietnam will become increasingly important in the coming years.

What about African markets?

So far, our priorities have been elsewhere. With the sources of growth changing, we may have to consider some African markets in the future.

Luxembourg is not in competition with Paris or Frankfurt.
Nicolas Mackel

Nicolas MackelCEOLuxembourg for Finance

Abroad, how do you define the Luxembourg financial centre, given the fears of competition between financial centres?

I explain the Luxembourg financial centre to my foreign contacts through complementarity, by making them understand that its added value lies in the multi-jurisdictional expertise that the financial players come here to seek. Luxembourg is not in competition with Paris or Frankfurt.

At a local level, what obstacles could hinder the development of the financial centre?

The cost of labour in Luxembourg and digitalisation mean that activities present in the marketplace will have to be rationalised.

Could this lead to a loss of competitiveness for the Luxembourg financial centre?

The shortage of talent is the number one problem in the marketplace. Many players can no longer develop the activity they had planned in Luxembourg and they will have to develop it elsewhere. This is an issue that needs to be addressed urgently in 2023. It is one thing to campaign abroad to recruit talent, but we must also tackle the basic problem: the cost of housing. Whoever the next government is, they need to realise that our economy depends on it.

What international influences are impacting the financial sector?

The markets are falling and assets under management in funds have fallen from almost €6,000bn at the beginning of 2022 to €5,300bn. In addition to that, the regulatory environment makes it almost suspicious to provide services from one country to another. The issue is systemic for Luxembourg.

Read the original French version of this interview on the site. This article was published for the Paperjam+Delano Finance newsletter, the weekly source for financial news in Luxembourg. .