In the background of the increase in the operating costs of the Financial Sector Supervisory Commission (CSSF) highlights the increase in staff numbers, which was particularly marked during the 2010s. Between 2008 and the present day, the workforce has almost tripled, now standing at over 900 staff members.
CSSF staff numbers
A few years after Claude Marx took over as head of the CSSF in 2016, staff numbers have stabilised. “Overall, we haven’t increased our staff numbers in recent years,” he says. Source: CSSF
Luxembourg has long been criticised for the lack of resources available to its regulator. The International Monetary Fund, the Financial Action Task Force (FATF), the European Commission and the European Central Bank all considered that staffing levels were insufficient to ensure credible supervision. In response to this criticism, the authorities launched a rapid recruitment drive.
This shift was accompanied by integration challenges, which the financial sector remembers all too well. On the one hand, it is said, young graduates with no experience had to be trained, often without the existing teams having the time needed to mentor them. On the other hand, the CSSF recruited experienced professionals from banks and audit firms. Many professionals thus joined the regulator, fuelling discontent among institutions that were losing talent… whilst still having to fund them through supervision.
Within Luxembourg, the CSSF currently appears to be comparatively better staffed than the Insurance Commission. When comparing the number of staff to the size of the relevant market (measured by the number of jobs in supervised entities), the CSSF appears to be 2.7 times better staffed than the CAA, according to our estimates. This can be explained by significantly greater regulatory complexity, a much higher number of entities, stronger European and international pressure, and a higher level of systemic risk.
When compared with other European countries, the assessment of staffing levels depends on the benchmark used. In relation to the local economy, Luxembourg’s financial regulators (the CSSF and the CAA) appear to be well-staffed when their workforce is compared to the number of jobs in the financial sector (around 40 jobs per supervisor, compared with over 600 in France) or to the working population.
By contrast, when compared to overall assets, the CSSF and CAA appear to be moderately, or even slightly, understaffed, given the total volume of financial assets or domiciled funds managed within the international hub that is Luxembourg. “Comparing our staff numbers to assets under management makes little sense, as a small fund requires a level of supervision comparable to that of a large fund,” puts into perspective the managing director of the CSSF, 
On a like-for-like basis, we no longer need to significantly increase our workforce.
For the past three or four years, the CSSF has stopped increasing its workforce in net terms. It is now focusing on replacing staff due to turnover (30 to 40 departures per year) linked to retirement and moves to the private sector. Has the Commission reached its critical mass? “On a like-for-like basis, we no longer need to substantially increase our workforce,” replies Claude Marx, emphasising the phrase “on a like-for-like basis”. Despite the European Commission’s stated aim of reducing regulation by up to 25%, the financial sector has yet to see the effects of this. On the contrary, new rules, such as MiCA, DoRe and the AML package, have come into force.
To manage its growing remit – for example, in the context of the Dora regulation on digital operational resilience – without simply increasing staff numbers, the regulator is relying on the ‘CSSF 4.0’ strategy, which is based on three pillars:
• training: investment in upskilling staff;
• large-scale digitalisation: investment in electronic service points (e-desks) and the signing of a contract with Clarence (a sovereign cloud platform in partnership with Google) to use artificial intelligence securely;
• lean management: the systematic optimisation of all internal processes to eliminate waste.
For the ABBL, “continuing efforts to optimise operations, particularly through digitalisation and the simplification of processes”, is “all the more important” in the current climate: “The CSSF, like all economic actors in Luxembourg, is facing an environment characterised by high labour costs. Added to this are the constraints associated with its status as a public institution, which entails, in particular, more rigid recruitment, remuneration and management frameworks than in the private sector, as well as increased administrative requirements. These factors can limit operational flexibility and contribute to a structural rise in overheads.”
Key success factor
“The issue is not just one of quantity: it is also one of quality,” adds a senior figure in the financial sector who does not wish to be named. “Are the CSSF’s working methods up to date? People are always criticising the slowness of certain processes: shouldn’t there be a complete reorganisation? There has been a whole series of IT investments, particularly in artificial intelligence, but there is always a stumbling block: the civil service. The CGFP (trade union) mindset is also very strong within the CSSF.”
When asked about its view of the CSSF’s resources, the ABBL chooses its words carefully. “It is essential to be able to rely on a regulator with adequate resources and specialist expertise,” states the banking organisation. “In this regard, the CSSF is widely recognised for its in-depth understanding of the market’s players and business lines, as well as for its accessibility and responsiveness. These factors are regularly highlighted by international institutions choosing to establish or expand their operations in Luxembourg.”
When contacted, the Association of the Luxembourg Fund Industry (Alfi) declined to comment.
