Luxembourg, 2 November 2020
The latest PBGL Survey for the private banking sector has just been published. Here is a summary of the key points, details of which can be found here.
466 billion EUR in assets
Assets in Luxembourg have more than doubled in the space of 11 years, reaching 466 billion euros in 2019. If the market effect partly explains this development, it nevertheless remains considerable and exceeds the forecasts of the last survey, which estimated 450 billion as total assets in 2019.
This figure testifies to the attractiveness of the Luxembourg financial center for private banking clients, who appreciate Luxembourg’s political, economic and regulatory stability, as well as it’s triple A rating, which reinforces this attractiveness.
The private banking sector therefore represents 11% of the value added to GDP by the financial sector as a whole in Luxembourg.
New standards for private banking
More high and ultra-high net worth clients are drawn to Luxembourg, with an increase in the proportion of clients with over 20 million euros. Market share of UHNW clientele is increasing year by year, representing 58% of total assets in 2019.
Conversely, the share of clients with less than 1 million euros continues to decline: while the assets of this client segment were 13% of total assetsin 2015, they measured only 8% in 2019.
This change in the client population implies new requirements for the private banking sector, which has had to design more sophisticated products and services especially for this segment, in order to remain efficient and serve them adequately. The evolving client base is accompanied by new standards in terms of digital access to information, which must be transparent, immediate and reliable.
85% of the assets come from European clients, of which 21% reside in Luxembourg and 17% in neighboring countries. These figures are stable compared to 2018.
A slight decrease in employees in private banking
The private banking sector recorded a slight decrease of 6.8% of employees, with 6,676 fulltime employees in 2018 compared to 6,224 in 2019. This decrease also affected client-facing staff, from 1,462 in 2018 to 1,365 in 2019, a decrease of 6.6%.This decrease is to be seen in the following context:
- The number of private banks decreased from 57 in 2018, to 54 in 2019.
- The banking sector as a whole remains stable in terms of the number of employees.
Short and medium term outlook
There are great opportunities for private banks. Starting with Brexit, which confirmed the attractiveness of the Luxembourg financial centre, many institutions having chosen Luxembourg as an anchor point to establish themselves in Europe and ensure their clients the continuity of their services within a single market.
In recent years international private banks have strengthened their presence in the European market from Luxembourg using the EU passport (freedom to provide services) and/or by creating a network of branches. The ecosystem available to private banks in Luxembourg also offers a real asset in the completeness of its range of services (bankers, consultants, lawyers, insurers), all the more appreciated in a context where customers are becoming more complex in their needs and requirements. asset management and structuring solutions.
The Covid-19 pandemic has been a major challenge for private banks, which nevertheless have been able to adapt and take the necessary measures to maintain their profitability, by accelerating digitalisation and remote services. And this, both for customers and employees, including working from home, supported by the measures taken by the CSSF. A key for private banks: many opportunities in terms of communication, new technologies, client relationship management and reporting.
The second challenge for private banks concerns profitability. The growing increase in regulatory costs, a negative interest rate environment, the need to invest in operational systems and the creation of new products and service all impact the profitability of private banks in Luxembourg.
54 banks participated in the 2020 edition of this survey on private banking, carried out jointly by the CSSF and the ABBL. Although carried out on a purely voluntary basis by the participants, the market coverage exceeds 95% of this segment of the banking industry. This allows the collection of consistent statistics and reliable data, necessary for a continuous analysis of trends in the private banking sector in Luxembourg.
About the ABBL
The ABBL is the largest professional association in the financial sector, representing the majority of financial institutions as well as financial intermediaries and other professionals in Luxembourg, including law firms, consulting firms, auditors, market infrastructures, financial institutions. payment and electronic money institutions. This makes us truly representative of the diversity of the Luxembourg financial centre, placing us in a unique position to give a voice to the entire sector, both nationally and internationally. We provide our members with the analysis, resources and services they need to operate in a dynamic financial market and increasingly complex regulatory environment. We thus provide a platform for openly discussing key industry issues and for defining common positions for the entire industry.