Globally, the environment last year was very “challenging,” said the chairman of the Luxembourg Bankers’ Association, , during the ABBL’s annual press conference on 30 April. “There were a certain number of geopolitical and economic uncertainties,” he noted, and “the international context has become much more complicated.” Technological evolution is accelerating, with artificial intelligence presenting both opportunities and risks.
Interest rates started to decrease in 2024 as well, though they remained in positive territory. Despite all these factors, the banking sector performed “rather well,” said Stein. Banks are in “good shape,” and that’s “good news” because they can continue to contribute to helping businesses flourish and to the development of the economy. This “solidity” is also a good point of departure for financing priorities like cybersecurity, the sustainable transition and defence.
Number of banks and employees fairly stable
Luxembourg welcomed three new banks last year, whilst 17 licences for professionals of the financial sector (PSF), investment companies, payment institutions and electronic money institutions and virtual asset service providers were granted. There has been some consolidation in the sector, Stein noted. The total number of authorised banks in Luxembourg stood at 115 in 2024.
The number of employees in the grand duchy’s banking sector (26,148) dropped a bit compared to the year before (26,285), but has remained relatively stable over the past few years.
There was a slight growth in the total balance sheets of banks, noted Stein.
The European Central Bank is approaching its “target” of 2% inflation and has begun to cut interest rates, but banks still posted good results thanks to positive interest rates last year. Whilst the increase in interest margins was not as impressive as the previous year (2023 saw a 50.9% increase in interest margins), 2024 still saw a respectable 4.4% increase in interest margins. Revenues thanks to commissions grew by 9.4% and was a driver of profits, said Stein, whilst banks were able to keep their costs stable (general fees, in fact, saw a decrease of 0.1%). Banks were also no longer required to make contributions to the European resolution fund in 2024, which played a positive role in keeping down costs.
Must remain agile to be competitive
“I believe that we have a consensus that the world has become more complicated,” commented Stein. Competitiveness has stepped into the spotlight, as illustrated by the publication of and the . But regulatory simplification, he cautioned, does not mean the same as deregulation. “It’s very difficult to have a clear view of what the next years will bring,” he added. “Our priority is to remain agile, to be able to prepare for uncertainties.”
In addition to competitiveness, talent attraction remains an important subject for Luxembourg, noted ABBL CEO , faced with competition from financial centres like Dublin, Paris and Frankfurt. The ABBL, for instance, is working on a “wealth management academy” to bring students closer to the “reality on the ground” and on initiatives to improve the legal framework for interns.
Support for residential housing--a key theme not just for the financial sector, but for the grand duchy as a whole--was a transversal initiative for the ABBL last year. Beyond the Prolog special purpose vehicle, but , the ABBL is also working on a feasibility study for a potential public-private partnership to propose affordable housing for young talent. This project could potentially encourage other companies to construct affordable housing for younger staff members, but Grbic noted that this initiative is still being analysed. Prolog will remain operational until 30 June (). But “creative ideas” like this special purpose vehicle “will not stop,” said Stein, who added that the ABBL sees itself as an enabler for creating “innovative initiatives” to tackle challenges like housing.
ING Luxembourg in May 2024. Asked about whether the ABBL expected other banks to close their retail banking businesses, Grbic replied, “We have absolutely no information about anybody in the retail sector thinking about closing their business here in Luxembourg. But on a regular basis we hear interest from banks abroad to enter the retail market in Luxembourg. Again, we have no specific bank where we know that they are interested in it, but from time to time, we know that people are thinking about it, doing their analysis.”
Cybersecurity and sustainable finance
Sustainable finance and cybersecurity are amongst the ABBL’s priorities. When it comes to sustainable finance, challenges include complexity, a disproportionate burden on SMEs and data on environmental, social and governance aspects (ESG) that are often fragmented, non-standardised or inaccessible, said , head of innovation, digital & sustainability at the ABBL. The contains simplification measures when it comes to corporate sustainability reporting, but the risk is that less data will be available. Efforts must be ensure that ESG data is public, standardised, reliable and inter-operable.
Cybersecurity, with the increased use of artificial intelligence, is becoming increasingly important. AI allows for more sophisticated cyberattacks, such as those that employ deepfakes. Between January 2023 and June 2024, said data from the European Union Agency for Cybersecurity (Enisa), 46% of attacks in Europe were directed against banks, with a peak in distributed denial-of-service attacks (DDOS) linked to Russia’s full-scale war against Ukraine. In addition, figures from the grand ducal police show that there was 20.8% increase in online scams in 2024. Awareness-raising measures and vigilance are therefore necessary.
The Digital Operational Resilience Act (Dora) aims to reinforce cyber and operational resilience in the financial sector, along with risks linked to third-party providers. Kautz also noted that the , allowing people to immediately block their credit cards or resolve Luxtrust issues. A national task force--headed by the ABBL and the House of Cybersecurity--has also been put in place to fight against online fraud, said Kautz. Banks are often just one link in a scam, which can start with a phone call or social media video, she noted, making it crucial to raise awareness around the topic. A new webpage--cyberfraud.lu--will be live in the coming weeks, providing information to protect people from cyber scams and pedagogical material.