Luxembourg’s banking sector recorded a modest monthly contraction in February, with the aggregated balance sheet of credit institutions falling to €1.000trn at the end of the month from €1.007trn on 31 January, according to preliminary data published by the Central Bank of Luxembourg (BCL) on 1 April 2026.
The 0.62% decline was driven mainly by a fall on the asset side in loans to other banks and deposit-taking corporations and, on the liability side, by lower deposits from the same counterparties, the BCL stated. Despite the monthly drop, the balance sheet was still 2.07% higher than a year earlier.
Interbank activity weakens
A key feature of February’s data was the retreat in interbank activity. Net interbank lending, defined by the BCL as the difference between interbank loans and deposits, fell by €3.27bn, or 1.45%, to €222bn at the end of February 2026.
That decline points to a softer month for cross-bank funding flows, which remain central to Luxembourg’s financial system given the country’s role as a hub for international banking and fund-related activity. The fall in both interbank loans and interbank deposits indicates that the monthly contraction in the overall balance sheet was largely balance-sheet driven rather than the result of weaker domestic credit demand.
Domestic lending grow
By contrast, lending to resident non-bank customers continued to expand. Loans to this segment rose by €816m, or 0.68%, between January 2026 and February 2026. Over 12 months, those loans increased by €5.42bn, or 4.71%.
The annual breakdown points to a mixed picture across the domestic economy. Loans to non-financial corporations fell by €605m, or 2.58%, showing weaker borrowing among businesses.
At the same time, lending for house purchases rose by €1.20bn, or 2.90%, over the year. Loans to other financial intermediaries posted the strongest increase, rising by €4.52bn, or 10.46%.
The divergence between weaker corporate lending and stronger lending to households and financial intermediaries suggests that credit demand is increasingly concentrated in housing and fund-linked activity rather than in the productive corporate sector.
Deposits rise
On the liabilities side, deposits from the resident non-bank sector also edged higher. These deposits increased by €659m, or 0.21%, between January 2026 and February 2026. Over the 12 months to February, they rose by €12.8bn, or 4.25%.
Deposits from other financial intermediaries, which accounted for 68.5% of the total resident non-bank deposit base as at 28 February 2026 and included funds placed by monetary and non-monetary investment funds, climbed by €13.3bn, or 6.55%, between February 2025 and February 2026.
By contrast, deposits from non-financial corporations fell by €2.45bn, or 9.39%, while deposits from other sectors declined by €659m, or 2.54%. The fall in corporate deposits may indicate that companies are drawing more heavily on cash reserves or generating less surplus liquidity than a year earlier.
