Two Chairmans reflecting on recent developments and forthcoming challenges

On the handover of the presidency of the ABBL, Guy Hoffmann, the outgoing chairman, and Yves Stein, the newly elected chairman, take a moment to ponder recent developments within the ABBL and the forthcoming challenges awaiting Luxembourg banks.

Guy Hoffmann, what were your ambitions when you took over the ABBL six years ago?

Guy Hoffmann (GH):

I am convinced that the competitiveness of Luxembourg’s financial centre should serve as the North Star for the ABBL and its members. It remains the backbone of our economy and is thus essential to our nation’s prosperity. In this respect, as I embarked on my chairmanship, I had a clear vision of what I hoped to accomplish and of the areas the ABBL should focus on: sustainable finance, digital transformation and financial education.

Would you say today that the mission has been accomplished?

GH:

I dare to think that on all the three topics our association stands taller today.

The proactive promotion of sustainable finance has become a cornerstone for the ABBL. In the digital area, our association plays an extremely valuable role as a catalyst and facilitator in the Luxembourg ecosystem. Crucial to this endeavor, was the decision to embrace the fintech sector. We are now set up to provide effective support to our members as they navigate through the challenges of risk management, but also to help them seize the promising opportunities for the European and Luxembourg financial centers that both sustainable finance and digitalisation entail.

As for financial education, the ABBL Foundation plays a pivotal role in addressing the social challenge, which is to provide younger generations with robust knowledge to face up to the harsh economic realities of life, as well as to equip all generations with the necessary reflexes to guard against the scourge of online fraud.

And this despite that your tenure was not a leisurely walk through the parc…

GH:

No, it was not. The ABBL advanced despite Brexit, a pandemic, the return of war in Europe, all of which led to unfathomable suffering and economic upheaval. Throughout these turbulent times, Luxembourg banks consistently were up to their task, with the ABBL always seeking to be part of the solution.

Concerning Brexit, we strongly advocated for maintaining close ties with the City of London, as we must not isolate us from its essential know-how and liquidity reserves in the interest of both our own open financial center and the wider European Economy.

Swift and effective cooperation with the Ministry of Finance and the CSSF helped us to navigate through the pandemic, allowing our members to assure continuity of service and establishing a unified approach on moratoria and lending to support local businesses.

And as for the housing crises, our members also want to be part of the solution. They sought dialogue with households in difficulty in order to find individual solutions to their credit problems. The ABBL also remained constructive and proactive, seeking solutions to challenges, such as to the bridge loans’ impasse, and consistently proposing measures to revitalize the property market, notably through the valuable input of the Retail Banking Cluster.

Would you give your successor any good advice along the way?

GH:

I know Yves for over 35 years, as we both started our career together at the same banks. So, I know that the ABBL is in safe hands. But maybe I can hint to two or three things which were valuable during my tenure.

First, capitalize on the excellent dialogue we have with our regulator. The CSSF certainly is strict but has a very good understanding of our members specificities and competence to guide them through their international challenges. I think that with all the hard work we’ve put in over the last years, our counterparts on the Route d’Arlon also see us as a valuable interlocutor and one of their most important transmission belts to the market.

See fostering cooperation within the industry as a priority. Continuously identify opportunities for collaboration, pooling resources, and enhance the way in which we cooperate. We need to mutualize to lower our expenses on tasks that do not add significant value to our high-end value services.

And finally, invest time and effort in explaining the indispensable and beneficial role banks play in society. This echoes with my biggest regret: our inability to instil in our fellow citizens the same pride for the financial centre that they once held for the steel industry, despite its remarkable international success. However, if our image is not positively perceived, individuals may not choose to join our workforce. And we know how talent attraction is crucial to our industry.

So, Yves Stein the path is clear…

Yves Stein (YS):

The milestones and benchmarks have certainly been set and the battles that I invite the ABBL, with the support of Guy, who will be preserved for us as he has agreed to take on the role of vice-chairman, to wage are on the same path.

But first, let me share with you my strongest belief: Our common compass should be achieving sustainable profitability while ensuring sustainable compliance with regulations. This is no easy task, as regulatory amplitude has become so extensive that both the industry and regulators struggle to keep up, hindering banks’ ability to adapt swiftly to customer needs and support the economy. And this challenge is intricated with the one of talent attraction, as we need to attract vital workforce not only to cope with this regulatory amplitude but also for future growth.

Combatting regulatory amplitude, is this not like Don Quixote tilting at windmills?

YS:

I am a pragmatist at heart, and I strongly believe that ABBL, both at local level and at European level, can be up to the task.

First, at local level, we have to align our perspectives and to persuade those who strive within complexity that a short-term outlook won’t suffice. Instead, it is through simplifying things that we can ensure the sustainability and advancement of our financial centre. Furthermore, proactive measures are essential. We all grumble about gold-plating, but it’s time to take concrete steps. Let us compile a comprehensive list of areas where this occurs or practices that warrant review. Both our parent Ministry and the CSSF are receptive to dialogue, but we must provide them with factual insights.

At European level, the ABBL can capitalize on its active participation within the EBF, where it stands as one of the most committed members. Additionally, our Brussels representative office, shared with ALFI and ACA, positions us at the forefront. Our teams engage daily with the European Commission, Members of the European Parliament, and associations across borders, rallying support and forging alliances at a moment when I see a window of opportunity. If anything, the crises highlighted by Guy have underscored the fragility of our Union, prompting our leaders to reconsider the competitiveness aspect within the regulatory framework. After all, what’s the point of being best in class when it comes to regulation, when others take far fewer frills to make the grade? So maybe today is the day to consider if we do need more regulation and continue to file flies or if we need smarter regulation and rather focus on chasing wasps?

Talent attraction is another complex challenge. Does the ABBL have all the cards in its hand to act on this point?

YS:

Talent attraction is certainly linked with broader challenges like access to affordable housing or mobility. And we also know that the market is a fiercely competitive market, as competition is strong both within the private sector and between private and public sectors for a shrinking pool of candidates.

On housing, as Guy mentioned, banks want to be part of the solution and I strongly encourage our CEO, Jerry Grbic and his team to push forward our members ideas to revitalise the market. However, perhaps we need to move beyond merely managing the current crisis and instead explore innovative solutions to facilitate housing access for the young recruits we aspire to welcome into our institutions.

The ABBL can also act through its role as an employers’ association. The collective bargaining agreement negotiated amidst the unique circumstances of the pandemic reached its conclusion at year-end. While maintaining banks’ competitiveness, the future agreement should enhance the appeal of banking careers to younger generations and provide member institutions with resources to train employees and adapt to industry changes.

On the matter of talent acquisition from third countries, we have to salute the Minister of Finance announcement at our OGM that the government plans to introduce improved tax incentives to attract and retain talent, including expanding the scope of profit-sharing bonus schemes and implementing a more appealing expatriate regime. This echoes proposals the ABBL made to political parties during last year’s election campaign.

Finally, and I’m also going to endorse Guy’s comments, we have to shape the banker’s narrative, especially if we want to attract local talent. Let me explain to you why this is important. I firmly believe that the “Dubaisation” or “Abu-Dhabisation” of our financial centre is neither desirable nor sustainable. We must strive for a banking sector our children aspire to work in. Yet, there’s no quick fix for this. While we can offer attractive job prospects in terms of compensation and work-life balance, the crux lies in underscoring banks’ significance and positive societal impact to revitalise their allure.