ABBL

ABBL: You have recently taken up the position of Director General of the Commission de Surveillance du Secteur Financier (CSSF), replacing Jean-Nicolas Schaus, who had held the position ever since the creation of the CSSF. What will be the main changes we can expect under your leadership?

Jean Guill: The new management team of the CSSF sees no need for a “revolution” in the CSSF’s style or supervision. We will continue to exercise our duties with meticulous care and to adopt a prudent approach, as was the case in the past.

We do nevertheless recognise that we have to constantly make sure we have the necessary tools to react to évents in the financial markets. It is essential that the supervision of the financial sector evolves over time and adapts to the needs of the financial sector. This means that as the financial sector changes and evolves we too need to become more specialist to ensure adequate control over new sectors and emerging trends. We have therefore also reorganised several departments. I am thinking, for instance, of the new department which is dedicated to the supervision of management companies – this is the result of an ever-increasing specialisation of management companies whose role has evolved into a separate activity in its own right. Equally, we have made a formal distinction between “Professionals of the financial sector” and “Investment Firms” and have therefore allocated their supervision to two separate departments.

Finally, I think that our external communication needs to be revisited so that the CSSF becomes more visible and more present in the financial sector, within the limits, of course, of our prudential and supervisory mission.

ABBL: As a consequence of the financial crisis, the reform of the European supervision has become one of the most pressing issues in finance. From a Luxembourg perspective, what are your views on the reform of supervision as proposed by the de Larosière High Level Group?

JG: We tend to agree with the de Larosière report and proposals. We support, in principle, the split between macro-economic and micro-economic supervision. From our point of view, it makes sense for national regulators to be responsible for the Prudential supervision of the detailed workings of the national financial markets and, on the macro-economic side, for the supervision of systemic risk to be housed with the central banks.

The formalisation of the long-standing cooperation between authorities at supra-national level and the creation of new agencies such as the European System of Financial Supervisors (ESFS) and the European Systemic Risk Council (ESRC) are also positive developments.

However, the devil is in the detail. We still have a few reservations, for instance, about how the intended legallybinding mediation mechanism will work in the future, in particular as regards disagreements between supervisors of a college, say on the issue of a multi-national financial institution.

On what basis will a college of supervisors or one of the new agencies or indeed a mediation mechanism be able to impose a decision on a national regulator? Questions regarding the neutrality of any such body or the legally-binding effect of its decisions need to be carefully worked out. Equally, the legal basis for the interaction of the different new agencies and bodies and their respective responsibilities and accountability are still unclear.

ABBL: Do you believe that Luxembourg will have sufficient weight in the proposed European System of Financial Supervisors (ESFS)?

JG: To date no decision has been reached as regards weighting in the ESFS. We are currently awaiting a législative proposal by the EU Commission although we do not anticipate much progress in this matter until the new Commission is firmly in place.

We are strongly in favour of the “one member, one vote” approach. It is feasible to envisage that Member States retain a right of veto as regards models of supervision whereas qualified majority voting might be applicable to certain technical matters only.

ABBL: Macro-Prudential supervision, including an increased supervisory role for central banks, has emerged as a main aspect of reforming financial supervision in Europe. In this context, how do you see the relationship between the CSSF and the Luxembourg Central Bank in the future?

JG: The existing dialogue is constructive and a Memorandum of Understanding between the CSSF and the Luxembourg Central Bank is currently being finalised which will spell out the responsibilities and interaction between both institutions regarding Liquidity.

ABBL: How do you see the Luxembourg financial centre develop over the coming years?

JG: We need to arm ourselves with patience. As we move out of the financial crisis, the market will need to regain and restore the confidence of investors.

We expect the market to consolidate, that is to say we expect there to be mergers both in the banking as well as in the Investment fund sectors.

We are confident that the development of the UCI sector in Luxembourg will continue to be positive and that the implementation of the UCITS IV directive will open up new opportunities for the Luxembourg fund industry.

Indeed, the UCITS product is highly attractive to Professional investors and consumers alike. There is no other product which provides a similar level of comfort or protection and existing Luxembourg UCITS continue to be distributed globally - as can be seen by the ever-increasing demand by investors from Asia, Latin America and the Middle East.

Although we continue to see our strengths in the Investment fund industry, Luxembourg has also, since the 1980s, become a hub for back-office and administrative centres for credit institutions and we generally expect this trend to continue as we are able to draw from our experiences in the past and offer a diverse, qualified and bi-or tri-lingual work force. The centralisation by some large multinational groups of their back-office and administrative centres in and to Luxembourg will therefore confirm Luxembourg as a location of choice for international players in the financial markets.

(Article from the Luxembourg Banking Quarterly - 2/2009)

(Photo: © Steve Eastwood, Business Review)