The aggregated balance sheet of Luxembourg banks experienced a 0.41% decrease in January 2024 compared to December 2023, and a 1.8% reduction in annual terms, reported the Luxembourg Central Bank on Tuesday 5 March 2024. Archive photo: Christophe Lemaire

The aggregated balance sheet of Luxembourg banks experienced a 0.41% decrease in January 2024 compared to December 2023, and a 1.8% reduction in annual terms, reported the Luxembourg Central Bank on Tuesday 5 March 2024. Archive photo: Christophe Lemaire

Luxembourg’s banking sector experienced a slight contraction in January 2024, with varied trends in loans and deposits, reported the Luxembourg Central Bank on Tuesday.

The aggregated balance sheet of credit institutions in Luxembourg experienced a marginal decrease of 0.41%, falling from €946.526bn at the end of December 2023 to €942.638bn on 31 January 2024, as disclosed in preliminary data by the Luxembourg Central Bank (BCL) on 5 March.

Assets and liabilities

This decline was mainly attributed to a reduction in other assets and loans towards other sectors on the assets side, and a decrease in deposits from other sectors on the liabilities side.

In annual terms, the shrinkage amounted to 1.8% in the aggregated balance sheet. Net interbank lending, which represents the difference between interbank loans and deposits, also experienced a downturn, dropping by €2.015bn (0.9%) to settle at €216.374bn by the end of January.

Lending and deposits

The lending landscape exhibited mixed trends. Loans to resident households increased by €1.283bn (1.1%) from December 2023 to January 2024. However, this category of loans saw a 4.4% reduction over the past year, amounting to a €5.145bn decrease. The analysis of loans by recipient further detailed the yearly fluctuations, with loans to non-financial corporations falling by €1.312bn (4.5%), loans for house purchases by €531m (1.3%) and loans to other financial intermediaries by €2.994bn (7.6%).

On the flip side, deposits from the resident non-bank sector showed a slight increase of 0.7% (€1.899bn) in the short term between December 2023 and January 2024. Yet, a significant long-term decline was observed with a 10.7% (€32.673bn) drop over the past twelve months. Breaking down the deposit categories, other financial intermediaries deposits, constituting 65.8% of the total and including both monetary and non-monetary investment funds, plummeted by €31.652bn (15.0%). Conversely, household deposits saw a marginal increase of €525m (1.2%), and NFC deposits grew by €555m (2.4%), while deposits from other sectors declined by €2.101bn (8.1%).

Reserve requirements

The BCL also announced adjustments to the reserve requirements for credit institutions. For the maintenance period running from 31 January to 12 March 2024, the reserve requirement was set at €6.183bn, marking an increase of €131m compared to the previous period.

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