Will CSSF fees stop rising? Banks and funds are criticising the growing burden of the so-called ‘taxes’ levied by the Financial Sector Supervisory Commission on the entities it supervises. Good news for the latter: the next announcements regarding their contributions, due at the end of 2027, may be less painful than in the past. The introduction of state co-financing of around 10% (€20 million) is in line with a long-standing demand from the financial sector.
The impact of the taxes is a matter of debate. Some consider it negligible when compared, for the 115 banks, to their expenditure (€8.5 billion) or their profit before provisions and tax (€9.4 billion), according to the 2025 banking results published by the CSSF. Others, however, see it as an obstacle to the development of the financial sector. It is indeed difficult for local managers in Luxembourg to justify regular increases in supervisory costs to their parent companies.
This lack of understanding is all the more pronounced given that, in some countries such as Ireland, financial supervision is the responsibility of the central bank, which has its own sources of income (notably through monetary policy operations or a share of the European Central Bank’s profits). These revenues help to fund supervisory activities.
Very tight margins
Historically, the CSSF’s budget has been almost entirely funded by the supervised entities. Fees are adjusted every three to four years, a delay linked to the management of budget cycles that alternate between periods of profit, break-even and loss. State subsidies already existed, but they are now on a different scale: the government paid a subsidy of €20 million in 2025 and the same amount in 2026.
“The government’s decision to introduce a budgetary contribution covering around 10% of the CSSF’s budget is a positive sign,” says the Association of Banks and Bankers of Luxembourg (ABBL). “Given the importance of the financial sector to the Luxembourg economy – in terms of jobs, tax revenue and contribution to growth – it seems reasonable that its prudential supervision should not rely exclusively on the supervised entities. Mixed funding models already exist in several European jurisdictions.”
“There are several factors to consider,” said the Director General of the CSSF, 
Independence under duress
This raises the question of funding. “As long as the current infrastructure – which we consider essential to Luxembourg’s reputation – is maintained, the method of funding matters little to us, subject to one clear condition: our independence,” insists Claude Marx. “In practical terms, the State must under no circumstances finance the majority of the CSSF’s budget. This is an important point for both the International Monetary Fund and the European authorities.”
Another point of concern for the CSSF’s Director-General is ensuring that market participants are not discouraged. “For large players, the costs remain negligible – in the region of zero point something per cent of turnover, in other words, insignificant. The area of concern relates to very small players: the level of fees must not act as a barrier to their entry into the market.”
From this perspective, Claude Marx understands “the aim of increasing the state’s contribution in order to ease the burden on the market”. “This can be justified given that the financial sector generates at least €4 billion in tax revenue: it is therefore not unreasonable to levy a fraction of this – for example, 0.5% – to support the CSSF.”
The issue of fines
Where should the balance be struck? “The more the state’s contribution increases, the more the market’s contribution decreases, but the more the CSSF’s independence is eroded,” our interviewee points out. He goes on to set out the market’s expectations regarding the forthcoming adjustment of fees: “We must bear in mind that our budget currently stands at around 200 million euros. If the state funds 10% of that, that amounts to 20 million, which remains a modest sum.”
Luxembourg is not expecting a miracle: it is said that this state contribution might merely serve to offset the ongoing rise in operating costs without leading to any real reduction in taxes for the sector. This is all the more true given that a second change is on the horizon: according to a draft bill, the proceeds from financial penalties imposed by the CSSF will now go towards the state budget rather than the Commission’s own budget.
The CSSF’s management, “weary” of the debate over fines, took the initiative itself to seek clarification from the government. Claude Marx rejects the notion that the CSSF imposes fines to fund itself, describing this argument as “nonsense”. He would prefer the money to go directly to the Treasury to remove any suspicion of a conflict of interest.
Fines are budgeted at zero as they naturally vary from year to year.
Whilst the fines collected by the CSSF certainly constitute a source of revenue, their amount remains limited, accounting for no more than 5% of the Commission’s operating budget. “Fines are budgeted at zero because they are, by their very nature, variable from one year to the next,” explains Claude Marx. “To be entirely accurate, it should be noted that we also collect between €500,000 and €1 million in fines each year for recurring breaches, such as the failure to file annual accounts or auditor’s reports. These are, in a sense, ‘automatic’ fines, but their impact remains marginal.”
“The ABBL has never suspected the existence of any conflict of interest,” the banking association responded. “That said, this point can be viewed in the context of the ongoing debate on public funding for the CSSF. The ABBL would welcome the idea that these funds could supplement the State’s budgetary contribution to the financing of the supervisory authority.”
Whilst the ABBL considers the issue of supervisory costs to be “legitimate”, it is careful not to overplay its hand. It points out that the fees, set “in accordance with transparent and predictable procedures”, “have not systematically increased in recent years”. “The CSSF has also made efforts to refine the calibration of these fees, introducing greater granularity and pursuing an approach based on proportionality and risk – a direction we fully support and encourage it to continue. Its investments in digitalisation are also a step in the right direction, helping to strengthen its operational efficiency, and deserve to be continued over the long term.”
Increased regulatory pressure
The association also wishes to broaden the perspective: “The overall burden on institutions is not limited to the costs of direct supervision alone, but includes a growing range of regulatory and compliance costs. These now account for a significant proportion of banks’ investments in Europe. In this context, any new European initiative – including those aimed at strengthening integration and supervision, such as the Market Integration and Supervision Package (MISP) – must be assessed in terms of its cumulative impact on the sector’s competitiveness.”
In Luxembourg, there are concerns that direct supervisory powers will be transferred from the CSSF to ESMA, the EU’s financial markets regulator and supervisory authority, as part of the MiSP package. According to the financial sector, this would result in an increase in the overall cost of supervision. “The evolution of the European framework towards greater centralisation of supervision – through mechanisms such as the Single Supervisory Mechanism (SSM) or the future European Anti-Money Laundering Authority (AMLA) – has not resulted in a tangible reduction in costs for market participants. As noted by the European Banking Federation, these developments tend to build upon existing arrangements rather than replace them, which calls for increased vigilance regarding the overall burden,” concludes the ABBL.
The Luxembourg Fund Industry Association (ALFI), which was also approached for this article, declined to comment.
