The China Banking Association and the Luxembourg Bankers’ Association sign a MoU

ABBL Published 02.01.2018

An interview with the CEO of the ABBL, Serge de Cillia

On 26 September 2017, Yves Maas, Chairman of the Luxembourg Bankers’ Association (ABBL) and Runzhong Huang, Secretary General representing the China Banking Association (CBA) have signed a Memorandum of Understanding (MoU) between the two banking associations. The agreement aims at establishing a regular communication and information sharing between the two banking associations as well as at jointly organising professional events. ABBL and CBA will exchange on all aspects of the banking industry, including but not limited to the latest development of regularly frameworks and sound practices for investor protection.

Mr de Cillia, the ABBL has signed a memorandum of understanding with the China Banking Association to promote information exchange within the banking industry, relating to the latest developments in regulatory frameworks and successful practices in investor protection. Are there any specific projects that will be implemented in the near future?

Yes, a Memorandum of Understanding (MoU) has been signed to foster exchanges between the two associations. There are several current projects ranging from training and education to more technical projects regarding implementation of new regulation, and other future projects that will be presented in due time. What we do know is that the relations between the CBA and the ABBL will go a step further, in the interest of all the members represented by our two associations.

How will ABBL and the China Banking Association promote market development, industry insight sharing, and data exchange?

The CBA and the ABBL plan to exchange best practices with regular meetings (timing to be defined), proactive exchanges of information on topic of interests for both associations, keep regular contacts and organise joint events.

Luxembourg is very attractive to Chinese banks, with seven Chinese banks already established in Luxembourg. Besides offering Chinese banking institutions entry to into European market, what other advantages does Luxembourg provide?

According to the latest Global Financial Centre Index, Luxembourg is among the top 3 financial centres in the European Union. Contrary to many other financial centres, the Luxembourg financial centre offers crossborder expertise and spans a very diverse range of activities: wealth management, fund distribution, corporate finance, insurance, capital markets activities and many others. Chinese banks serve China based clients and help them invest into Europe, and assist European clients to invest in China. In addition to corporate banking services, the Chinese banks have expanded into capital market activities in Europe and asset and wealth management, thereby serving as a bridge connecting Europe and China. The continuous opening of the Chinese bond market, the third largest in the world, provides further opportunities for Luxembourg RMB bond listing. In the beginning of 2017, China’s onshore bond market was included in the Bloomberg benchmark indices. This is a further step in attracting foreign investors to enter the Chinese bond market. When Chinese companies plan to list RMB bonds in continental Europe, the Luxembourg Stock Exchange (LuxSE) is a natural choice, as it is the leading stock exchange for Dim Sum Bond listings in Europe and second globally behind the Hong Kong Stock Exchange. With the growing awareness of environmental costs imposed by the rapid growth of the Chinese economy, interest in the Green Bonds has grown in recent years. The Luxembourg financial centre is well positioned to play a key role in this area due to its expertise in the field of green finance. Luxembourg’s established position as a global crossborder fund hub and leading listing centre, reinforces the Grand-Duchy as an important offshore RMB financial centre. Providing a platform for RMB product providers, Luxembourg connects the onshore and offshore RMB markets with European investors.

You mentioned previously that some companies might transfer their businesses into the EU after Brexit. From the perspective of banking industry, will Brexit impact Luxembourg’s position as a European financial center? Will Brexit offer any new opportunities to Luxembourg?

It’s too early to assess the impact. Luxembourg just wants to ensure continuity for all business actors and avoid a cliff-edge effect that could impact the final client. Financial institutions that serve the single market out of London are facing uncertainty as regards the future of their present set-up. Most of them need predictability and legal certainty for themselves and their clients and do not wait for the outcome of negotiations between the EU and UK. Luxembourg has been contacted by many financial institutions that are actively looking at alternatives for the part of their business that will be impacted by the loss of their EU passporting ability. Some of the financial institutions that until now did not have an EU – presence outside London, have announced the set up of a new subsidiary, while those that already had a presence in Luxembourg or in other EU financial centres, are in the process of strengthening their existing activities in the EU (i.e. JP Morgan and Citi have said they would strengthen their presence in Luxembourg amongst others). The timing of these announcements is decided by the financial institutions themselves and often depends on the regulatory approval process. With regards to Luxembourg, the following official announcements have been made over the recent months: M&G, in the investment fund business, AIG, Hiscox, FM Global, RSA, CNA Hardy, Tokio Marine, Liberty in insurance, and PPRO, as a payment service provider, have announced to set up a new EU hub in Luxembourg to ensure that they can continue to serve their EU customers. Over the coming months, more companies will follow in their footsteps. Besides asset managers, banks, insurance and Fintech companies, a number of leading global private equity will also establish their EU hubs and strengthen their presence in Luxembourg as a consequence of Brexit. More recently, banks such as Northern Trust and Julius Baer have chosen Luxembourg for their European hub as well. Given its long-standing track record as a partner to the UK-based financial services industry, Luxembourg is seen as a natural choice for any financial institution that wants to continue to serve the EU market in the future.