Finance Industry Briefing
Luxembourg Finance Industry
European Banking Industry
Global Economy and Markets
Tax and Compliance
Bank Regulation and Capital Rules
Global Private Banking
Luxembourg Finance Industry
CSSF’s Claude Marx seeks solutions to ease burdensome financial reporting requirements

CSSF CEO Claude Marx has called for a rethink of financial sector regulation to reduce unnecessary complexity and administrative burdens, arguing that some rules could be lightened for small and non-complex banks since their failure would not pose a significant risk to the financial system. He sees scope to reduce reporting requirements that add little value for supervisors, and calls for greater adoption of risk-based regulation and finding less burdensome ways of accessing key information. Marx also says there is no evidence of a need to change AIFMD rules on cross-border delegation of asset management functions and substance, and calls for the EU to devise a less complex formula for extending the AIFMD passport to non-EU alternative fund managers.

Best source: Paperjam
OpenLux accusations stem from misunderstanding of Luxembourg’s financial industry: Pierre Gramegna

Finance minister Pierre Gramegna says the success of the Luxembourg financial sector is driving accusations of wrongdoing following the publication of the OpenLux report on the country's beneficial ownership register. He has told parliament that commentators misunderstand the nature of the financial sector in making assumptions that malpractice is inherent in international business. Nienke Palstra, a senior campaigner with NGO Global Witness, says Luxembourg has always been seen as a high-risk EU member state in terms of money laundering, although the anti-corruption group has previously noted that Luxembourg is one of just five EU countries where the beneficial ownership registry is accessible without charge or registration.

Best source: Luxembourg Times (subscription required)
See also: RTL Today
See also: RTL 5 minutes (in French)
See also: L'essentiel (in German)
European Banking Industry
Greek banks plan to raise €3bn in fresh capital this year

Greek banks are planning to raise around €3bn this year to improve their capital levels and protect their liquidity. Piraeus Bank plans to increase its equity capital by €1.1bn, while other banks are planning to issue tier 2 securities and senior bonds.

Best source: Kathimerini
Swiss banks launch blockchain association

Swiss banks including Pictet, Lombard Odier, Mirabaud and Edmond de Rothschild have established a group aiming to improve compliance and administrative exchanges through blockchain. The Zurich-based Blockchain Association for Finance will focus on how the financial industry uses and supervises distributed ledger technology. The other bank members are Banque Internationale à Luxembourg, Hyposwiss, Gonet, Reyl and Banque Cramer, along with Sygnum, Pleion, Capitalium Advisors, Bedrock, Fransad Gestion, OLZ, Stanhope Capital and the Alliance of Swiss Wealth Managers.

Best source: WealthBriefing (subscription required)
See also: Blockchain Association for Finance
Ikea acquires 49% stake in Ikano Bank from founding family

Sweden's Ikea is buying a 49% stake in financial services business Ikano Bank, which was spun out of the international furniture retailer in 1988, from the group's founding Kamprad family. Ikano already provides financial services to Ikea customers in eight markets as well as consumer banking services. Lending to Ikea customers accounts for around 25% of Ikano’s business and it is looking to extend its range of digital financial services online and in-store.

Best source: Reuters
Westphalian savings banks demand increased exemptions from negative interest rates

Westphalia's savings banks are suffering from persistent low interest rates, exacerbated by the negative deposit rates imposed by the European Central Bank. Liane Buchholz, president of the Westphalia-Lippe Savings Banks Association, is demanding higher exemptions from negative rates for the organisation's 57 institutions, saying more than three-quarters of them have exhausted the exemptions introduced in September 2019 by the ECB’s tiered system for the remuneration of excess liquidity holdings.

Best source: Börsen-Zeitung (subscription required, in German)
Global Economy and Markets
Moscow Exchange to open three hours earlier to attract traders from Asia

Moscow Exchange plans to open its currency and derivatives trading markets three hours earlier from March 1 to attract traders from across Asia, including Hong Kong, Singapore, India and China. The amended schedule will see the exchange open from 7 a.m. to midnight Moscow time. Previous efforts to increase the volume of Sino-Russian trading have had little success; while rouble-renmimbi trading has grown by 27% over the past five years to RUB986bn ($13.4bn) last year, it remains minuscule compared with rouble/dollar trading, which amounted to RUB266.6trn.

Best source: Financial Times (subscription required)
See also: Moscow Exchange
Manufacturing demand pushes tin price to highest level for seven years

Manufacturing consumption of tin has helped to lift the metal's price to its highest level for seven years at almost $24,000 a tonne, partly because of increased demand for computers amid the past year's surge in remote working. The metal is used in the production of solder, an essential component in binding circuit boards and wiring. Other contributing factors to the price rise include the growth of electric vehicles and housebuilding in the US, where it is used in pipes and cladding.

Best source: Financial Times (subscription required)
Riskiest US corporate borrowers account for biggest share of junk bond issues since 2007

The riskiest US corporate borrowers in the first weeks of the year make up the largest share of high-yield bond issues since 2007, according to Refinitiv. More than 15% of the total raised through junk bonds so far in 2021 has come from issues by companies with ratings of CCC or lower, adding to concern about the lowering of investment standards in the search for yield. Twenty-one per cent of high-yield bonds rated by Moody’s carry one of the agency's lowest labels, compared with just below 15% for S&P Global ratings. Triple-C rated bonds attracted $3.5bn in three separate weeks of January, a phenomenon seen only on seven other occasions over the past 20 years.

Best source: Financial Times (subscription required)
Japan’s economy contracted by 4.8% in 2020

Japan's economy contracted by 4.8% last year, its first annual fall in GDP since 2009, with the world’s third-largest economy declining by 8.3% between April and the end of June. Exports, household consumption and non-residential business investment recovered in the fourth quarter, when the economy grew by 12.7% on an annualised basis. However, the country risks losing momentum in the first quarter of 2021 following the government’s declaration of a state of emergency in multiple regions, including Tokyo and its suburbs.

Best source: Le Temps (subscription required, in French)
See also: Nikkei Asia
Tax and Compliance
German cabinet approves amendment to money laundering law

The German cabinet has approved a draft amendment to the country’s money laundering law including an expansion of its registry of beneficial ownership to all companies and an increase in exchange of information with other countries. Finance minister Olaf Scholz says the enhanced registry will make it easier to see through deliberately complex and artificial company structures and identify beneficiaries of transactions. The proposals would also enhance co-operation between German investigators and authorities in other EU member states and ease the transfer of information from Germany’s federal criminal police office to Europol.

Best source: Dow Jones (in German)
See also: dpa (in German)
Swiss regulator files complaint over US data sharing

Switzerland's data protection authority has filed a legal complaint against the government over the sharing of data about bank employees, lawyers, accountants and other third parties with the US as part of sweeping tax evasion investigations. Data Protection Commissioner Adrian Lobsiger says the finance ministry is failing to comply with a Supreme Court ruling that prohibits the indiscriminate disclosure of individual’s names without first notifying the person concerned. The finance ministry argues it is too time-consuming to block out all the names on thousands of pages of documents transferred to US authorities.

Best source: swissinfo
Berlin government unveils legislation designed to curb business with tax havens

Germany’s finance ministry has published a draft bill that aims to reduce tax evasion and avoidance through jurisdictions deemed unco-operative in tax matters. It would aim to discourage individuals and companies from conducting or launching business relationships with entities in jurisdictions that do not adhere to global tax transparency standards, using the EU’s tax haven blacklist as a reference. Dissuasive measures include limiting tax deductions derived from transactions with entities in unco-operative jurisdictions, refusing tax relief if at least 10% of a foreign company's ownership comprises individuals resident there, and requiring additional documentation and information as well as more restrictive rules governing withholding tax.

Best source: Die Zeit (in German)
See also: dpa (in German)
FATF postpones rescheduled March visit to Luxembourg

The persistence of the Covid-19 pandemic has led to the Financial Action Task Force to delay further its visit to Luxembourg to assess the implementation of measures to curb money laundering and the financing of terrorism. A new date to replace the scheduled March visit is expected to be announced at the end of next month. The publication of the group’s final report, which had already been postponed until October, could also be further delayed. FATF officials were originally scheduled to conduct their routine assessment of Luxembourg last November.

Best source: Paperjam (in French)
Luxembourg investment funds failing to register beneficial owners, say OpenLux researchers

More than 80% of Luxembourg private investment funds surveyed in an examination of the country's public beneficial ownership register failed to declare their ultimate investors as required by law, making the €4.97trn industry a black box for potential money laundering, according to a report by the Organized Crime and Corruption Reporting Project. The OpenLux investigation, conducted by journalists from media including Le Monde, Le Soir, the Miami Herald and Süddeutsche Zeitung in co-operation with Transparency International and the Anti-Corruption Data Collective, examined four million documents on 260,000 companies. The authors of the report acknowledged that the absence of reporting by most funds on their beneficial owners could reflect the fact that no investor met the threshold of holding more than 25% of shares or voting rights.

Best source: Reuters
See also: Sueddeutsche Zeitung (in German)
See also: Miami Herald
See also: Le Monde (in French)
Bank Regulation and Capital Rules
German and Italian banks seek pause in implementing Basel III standards

German and Italian banks have called for suspension of the implementation of Basel III capital rules because of the impact of the Covid-19 pandemic. Banking associations in the two countries have issued a joint declaration pointing to the risk of negative reaction from capital markets and curbs on lending if the requirements are imposed on schedule. The Deutsche Kreditwirtschaft and Associazione Bancaria Italiana organisations have also demanded the harmonisation of EU bank insolvency rules but also the strengthening of national deposit insurance schemes instead of at EU level.

Best source: Börsen-Zeitung (subscription required, in German)
Specialised PSFs see profit fall by more than two-thirds in 2020: CSSF

The aggregate net profit of specialised financial sector professional entities fell to €95.7m in 2020, down from €290.1m the previous year despite turnover remaining stable, according to the CSSF. Specialised PSFs, which cover 10 business lines including family offices, domiciliation agents, management companies and depositaries, reported revenues of €5.779bn last year, down slightly from €5.863bn in 2019, while the number of employees in the sector increased from 5,183 to 5,476.

Best source: Paperjam (in French)
Italy extends Monte dei Paschi short-selling ban

Italian secutities regulator Consob has extended the short-selling ban on shares in Banca Monte dei Paschi di Siena until January 5 next year. The ban also extends to subscription rights and convertible bonds, with the endorsement of the European Securities and Markets Authority.

Best source: Securities Lending Times
ECB may increase capital requirements for leveraged loans amid concern about overheated market

The European Central Bank may require banks to hold additional capital against leveraged loans as part of its yearly Supervisory Review and Evaluation process, warning that some institutions are ignoring warning signs of potential repayment problems if interest rates rise. The ECB is concerned that institutions have ignored its requests to cool the market for loans to highly-leveraged entities including private equity portfolio companies, in a market where investor demand for yield has led to low pricing and less stringent underwriting standards and loan terms. Some banks have been directly contacted about their lending business but Deutsche Bank refused to take action, which it was able to do since the ECB's recommendations did not have regulatory force.

Best source: Financial Times (subscription required)
See also: Handelsblatt (in German, subscription required)
Luxembourg’s financial sector continued to grow amid last year’s eurozone downturn

Output and employment continued to grow in Luxembourg's financial sector in the first half of last year despite the Covid-19 pandemic, in contrast with the eurozone as a whole, according to Statec. The sector's gross value added increased by 1.4% and employment by 2.0% over the same period of the previous year, compared with declines of 2.0% and 0.4% respectively for the eurozone as a whole. In the third quarter, employment in Luxembourg's financial industry was up 1.4% year on year, compared with a eurozone fall of 1.0%. Luxembourg banks' average tier 1 capital ratio stood at 21% at the end of September, compared with 17% across the eurozone, and only 1% of their loans were classified as non-performing.

Best source: Paperjam (in French)
See also: Wort (in German)
See also: Delano
See also: Statec (in French)
ESMA warns financial businesses against bypassing post-Brexit rules with reverse solicitation

The European Securities and Markets Authority has warned banks and asset managers in the UK and other jurisdictions outside the union against seeking to bypass the new restrictions on provision of financial services to professional and individual clients in Europe. The EU has so far declined to grant regulatory equivalence status to most sectors of Britain's financial industry, and the sector was excluded from the post-Brexit trade deal agreed in December. The EU regulator has warned against invoking reverse solicitation when the initiative for a transaction is not in fact taken by a client, although bankers say they have been cautious in using reverse solicitations for marketing or selling directly into Europe since they run the risk of heavy penalties or even criminal proceedings. ESMA is scrutinising methods of solicitation including press releases, internet advertising and brochures, as well as phone calls and face-to-face meetings.

Best source: Financial Times (subscription required)
See also: European Securities and Markets Authority
Global Private Banking
Most private clients to rethink wealth planning strategies amid Covid-19: survey

Around 59% of high net worth individuals around the world are planning changes to their wealth planning strategies due to the impact of the Covid-19 pandemic, according to a study by accounting and consultancy firm BDO. Its survey of more than 350 private clients and advisers in 16 jurisdictions finds that 71% of respondents are concerned about the privacy and safety risks posed by tax transparency and reporting requirements. BDO says wealthy individuals and their advisers are facing a challenging global landscape including generational changes, economic upheaval and the pandemic amid growing emphasis on doing the right thing for society and the environment.

Best source: Wealth Adviser
HSBC to target wealth management in fresh strategy shift

HSBC is planning to target wealth management and deepen its focus on Asia in a bid to boost growth, as part of its latest strategic shift. The bank aims to conduct large-scale investment where it sees the biggest opportunities, most likely expanding in Asia, the UK and the Middle East. HSBC, which has much smaller wealth operations than rival institutions, will unveil the new strategy along with its annual results later this month, after its February 2020 strategy reset was overtaken by the impact of the Covid-19 pandemic.

Best source: Bloomberg
British private banks to be badly affected by Brexit: trade body

The UK's $1.7trn private banking industry would be particularly badly affected by the loss of access to the EU single market if new arrangements are not negotiated before it leaves, according to the British Bankers' Association. The association warns that UK private banks could be cut off from EU clients as there is no equivalence regime for retail and private banking services, making it impossible for banks to continue to operate in some countries.

Best source: Financial Times (subscription required)
Goldman Sachs launches mass-market robo-advisory service

Goldman Sachs has launched a robo-adviser offering wealth management services for investments starting as low as $1,000 in a latest effort to broaden its client base. Marcus Invest, which charges annual advisory fees of 0.35%, allocates and rebalances customers' wealth across portfolios of equities and bonds using its own models. The platform is accessible to clients of Goldman’s online retail bank Marcus, which was established in 2016 and is active in countries including Germany and the UK.

Best source: Reuters
See also: L'Agefi (in French)