Jeffrey Dentzer, head of Luxembourg market & CIB at Banque Internationale à Luxembourg, expects clients with positive ESG attributes to be favoured as regulations on sustainability will likely accelerate. He is attentive to the regulation, for which reporting on 2024 data will be required in 2025.
Dentzer argued during an interview with Delano that companies should already be in position to produce the sustainability reports, or if not, at least have the data. “The regulator is data driven…and hopes to get harmonised data to ease comparability between banks.”
He expects that clients will be required to be “ESG compliant” to access usual banking services. “Clients from the brown economy will have to pay more to get bank financing.” He acknowledged, though, that their financing may not come from banks anymore. Indeed, these players have no plan to pay higher rates and may turn to private credits to access liquidity.
Regulations to watch
Banks must prepare for the or Dora, adopted in early 2023. It addresses “cybersecurity and cyber resilience for banks and other financial institutions [and] enters into force on 17 January 2025.” Dentzer sees this regulation as a “big to-do in 2024.”
As the focus by banks is to address the topic individually, he thinks that they are missing out the mutualisation benefits. “If it is a market rule, shouldn’t we find a market solution?” Following that path will depend on the complexity of the respective banks and their maturity, i.e., whether the bank operates very old systems that need a complete revamp before their connection with more technology advanced institutions.
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Bil is also attentive to developments on the digital euro and the European digital identity, which will be the European electronic passport. Banks will need to enhance their systems to ease the onboarding of clients, Dentzer stated during the interview, which took place in late November.
He observed that competition forces everyone to stay up to speed with technological developments. “One cannot afford to miss one train as catching up becomes too difficult… we just implemented the revised , or PSD2, and we are already discussing about PSD3.”
We are struggling to reinvent ourselves…minerals created immense wealth for the country, then the banks, the funds before a fintech emergence in 2019 that went splash during the pandemic.
Dentzer thinks that the has gone largely under banks’ radar screens. He believes that access to comprehensive data easing the traceability in the supply chain will be key to demonstrate compliance with the new regulation.
Continued reliance on real estate and the financial hub to grow
Alternative funds continue to be a source of growth for domestic banks despite the recent drop in valuations. Dentzer explained that banks serve the industry through credit and the maintenance of deposit accounts. Given the slowdown of the economy, he sees opportunities for debt refinancing and on the back of business restructuring.
“The advantage of fintech over the banks is that they are very agile, creative and have innovative solutions,” stated Dentzer. Yet he thinks that complying with banking regulations will continue to be an uphill challenge for fintech firms, as “they do not have legal or compliance departments.”
Dentzer left Delano with the impression that the bank wishes to collaborate with fintech startups on many projects, but their funding will likely come from private equity.
A version of this article will appear in the print edition of the Paperjam+Delano Business Guide 2024.