A press release with no bank, no case and no key figures. On Friday 2 October, the CSSF reiterated why professional secrecy prevents it from responding freely when its supervisory role is called into question. It seems a thankless task: having to explain at length why one cannot explain oneself.

The law leaves little room for improvisation. Article 16 of the Organic Law prohibits CSSF staff from disclosing confidential information received in the course of their duties. A breach may result in a prison sentence of between eight days and six months and a fine of between €500 and €5,000. This protection covers trade secrets, financial data, investigations and information concerning third parties. It also serves to ensure the stability of the financial system. The regulator’s silence is therefore not a matter of communication preference. It constitutes an obligation subject to criminal penalties.

The timing, however, gives the article a particular resonance. The Financial Times recently reported that four former executives of Gazprombank Luxembourg are alleged to have made potential gains of over €9m through transactions involving Gazprom bonds. The newspaper raises questions about the circumvention of European sanctions and the possible use of inside information. Gazprombank Luxembourg and one of the former executives named deny any illegal conduct. The CSSF had inspected the bank in March 2023 following a tip-off; according to documents seen by the newspaper, the inspection led to requests for internal compliance measures, but no fine was imposed.

Amateur prosecutors will always be right

Claude Marx then found himself in an almost Kafkaesque situation before the members of Parliament. The director-general of the CSSF is reported to have stated that certain published details were inaccurate, without being able to specify which ones. Such a clarification would have revealed what his institution had examined. The regulator knows. The public knows that it knows. However, no one can ascertain what it knew, when it knew it, or what it did with that information.

The machinery of suspicion can then run at full throttle. For the self-appointed prosecutors of financial supervision, the absence of comment proves inaction; a belated sanction confirms blindness; an early intervention reveals arbitrariness. The CSSF loses even before the facts have been established. This criticism, by default, requires neither a complete file nor a right of reply. It possesses the comfortable simplicity of populism.

The former minister of Justice, Sam Tanson, proposes amending the law so that the CSSF may, in certain cases and in accordance with defined principles, respond to the allegations levelled against it. The intention appears to be a balanced one. However, this solution risks creating a loophole that is more problematic than the silence it purports to remedy.

Who would decide that a controversy warrants lifting part of the confidentiality? Who would choose the timing, the scope and the documents to be disclosed? The CSSF could draw from a confidential file those elements favourable to its own defence, whilst the supervised institution, the whistleblower or the individuals implicated would remain bound by their obligations. Transparency would become selective. Professional secrecy would no longer be a rule, but a communication tool.

What has become of the idea of a stronger financial centre?

The counter-argument deserves to be heard. A public institution must be able to correct a blatant falsehood, particularly when the regulator’s reputation affects that of the entire financial sector. Banque Havilland, Luxalpha and Gazprombank Luxembourg serve as reminders: in a small jurisdiction, legal proceedings against a single player quickly reflect on the supervisor, and, by extension, on the country itself. However, this injustice does not justify turning the supervisory authority into a party to the media trial it is tasked with investigating.

Another idea has resurfaced: that of a financial unit within the judiciary. Luxembourg already has an economic and financial department within the Public Prosecutor’s Office. The issue is therefore not simply a matter of putting a new sign on a door, but of bringing together, on a long-term basis, magistrates, investigators, analysts and technical experts capable of handling cases whose complexity often extends beyond national borders. In 2024, representatives of the judiciary deemed the 15 magistrates assigned to financial crime to be insufficient and also highlighted staffing needs within the judicial police, the investigating magistrates’ office and the Financial Intelligence Unit.

This approach addresses the problem more effectively than granting the CSSF a right of reply. Where a supervisory review raises suspicions of an offence, the supervisor must be able to refer a case file containing actionable evidence to the courts, which have the necessary time, resources and expertise. Publicity would then stem from the proceedings and the decisions themselves, rather than from a selection of information made by the institution under scrutiny. A financial unit would guarantee neither prosecutions nor convictions. Without additional resources or a different organisational structure, it would merely be a new name for an existing department.

The CSSF supervises and reports. The courts investigate and rule. Parliament oversees resources and regulations. Confusing these roles in order to provide the regulator with a defence in the media would not strengthen the rule of law. Those who systematically disparage the CSSF are succumbing to convenient populism; rewriting the law to enable it to win the battle for public opinion would amount to a form of symmetrical populism. A robust authority must sometimes accept defeat in the controversy of the day. However, a sufficiently strong institution must then step in to establish the facts.