ABBL: Luxembourg banks can spend up to 51% of revenue on compliance

Increased regulation takes up banks’ investment funds and staff

Luxembourg’s banks can invest over half their income to meet rules introduced in the decade since the onset of the global financial crisis, the Luxembourg Bankers’ Association (ABBL) said.

Speaking at the International Bankers Forum Luxembourg (IBFL), Alain Hondequin, the ABBL’s general counsel for business clusters, said: “When you look at the investments banks have to make to comply with regulation, it is 35% of their revenues, 51% for smaller banks.”

He said meeting rules such as MiFID II/MiFir, which took effect on 3 January, involves 13% of bank staff.

“These resources are not used to get new business,” he said.

MiFID II/MiFir is a legislative framework aimed at strengthening investor protection and making financial markets more efficient, resilient and transparent, according to the European Securities and Markets Authority (ESMA).

Regulation has become so complicated that it is getting more difficult to manage, Hondequin said.

“Data management is one of the bigger issues for banks,” he said.

“These last years, we have been asked to collect more data. Regulators are more intrusive by the day.”

Another challenge for banks is customer behaviour as they become evermore tech savvy, Hondequin said.

“The next generation is the millenials – more tech savvy, mobile and demanding.

“Everything needs to be fast, efficent and cheap – or free. That needs to be addressed.”

He said Luxembourg needed to market its banking toolbox, including its experience in cross-border financial services, which is in its “DNA”.

“Innovation is the only choice. Innovation is something we need to integrate into our models for private banks,” Hondequin said.

The country will hold a general election on 14 October, an event that could have implications for the country’s banks, Hondequin said.

“We need the next government’s support for Luxembourg banking, which produces a lot of added value for the economy,” he said.

“We need the right legal background and framework.”