Publication of the Annual Report 2014 of the CSSF

The report on the activities of the CSSF and the development of the financial centre in 2014 was published recently.

The report is available free of charge at the CSSF, L-2991 Luxembourg, email: direction@cssf.lu on request. It is also available for download at www.cssf.lu. An English version of the report will be published on the website in July 2015.

The 2014 trends for the different financial centre segments may be summarised as follows.

International aspects of supervision

The year 2014 was characterised by the launch, in the context of the European banking union, of the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM) and by the increased activity of the European supervisory authorities EBA, ESMA and EIOPA in order to harmonise the regulations and apply regulatory and implementing technical standards. The Asset Quality Review exercise of the Comprehensive Assessment carried out by the ECB within the framework of the SSM, the co-operation with the ECB and the national competent authorities in the Joint Supervisory Teams of the SSM, as well as the co-operation between national supervisory authorities within the colleges of supervisors for cross-border banking groups, mobilised many resources within the CSSF.

144 credit institutions
Balance sheet total: EUR 737.24 billion
Net profit: EUR 4,169 million

The number of banks decreased by three entities to 144 as at 31 December 2014. Ten banks started their activities whereas thirteen banks ceased their activities during the year.

The aggregated balance sheet total reached EUR 737.24 billion at the end of 2014, representing a 3.3% growth compared to 2013. This rise, shared by 62% of the banks of the financial centre, comes in a context of business upturn or development of new activities. In the latter case, the banks concerned generally originated from non-EU countries. Nevertheless, there is still a downward pressure on the balance sheet total of the Luxembourg banks belonging to European banking groups that had been particularly hit by the 2008 financial crisis.

The net profit of the Luxembourg banking sector reached EUR 4,169 million (+14.8% compared to 2013). This growth is mainly the result of two trends: the fall in general expenses which reflects the efforts of the banking sector to compress costs in a difficult operational environment, and, above all, the recovery of certain risk provisions. However, it should be noted that the upward trend was not shared by all the banks in the financial centre, as evidenced by 45% of the banks whose net results continued to decrease over a year.

315 PFS (111 investment firms, 123 specialised PFS, 81 support PFS)
Balance sheet total of investment firms: EUR 3.64 billion; specialised PFS: EUR 10.84 billion; support PFS: EUR 1.05 billion
Net profit: investment firms: EUR 153.6 million; specialised PFS: EUR 347.5 million; support PFS: EUR 59.9 million

With 31 new entities authorised during the year, against 30 status withdrawals, there have been many ups and downs on the PFS market, but, ultimately, the number of PFS of all categories only increased by one entity in 2014. Indeed, while the net development in number turned positive again for investment firms (+4 entities), the number of specialised PFS started to fall (-3 entities). The number of support PFS remained stable over the year.

The aggregated balance sheet of investment firms increased by 17.4% to EUR 3.64 billion as at 31 December 2014, owing mainly to the substantial growth of the balance sheet of one player authorised since 2010. As a consequence of the fall in the number of specialised PFS, their aggregated balance sheet fell slightly (-0.2%) and amounted to EUR 10.84 billion at the end of 2014. The aggregated balance sheet total of support PFS decreased to EUR 1.05 billion as at 31 December 2014 (-2.9%).

Although, overall, the net results of the investment firms grew by 2.9%, the individual situation of the entities is quite mitigated in 2014. Indeed, a certain number of investment firms showed stable net results, or even on the rise as compared to 2013, whereas other investment firms suffered, during the same period, decreases in their net results. A little less than a quarter of the investment firms even recorded negative results in 2014. The aggregated net result of specialised PFS, however, registered a considerable growth of 58.1%, 70% of which is attributable to two large entities. The majority of specialised PFS show a net result which increased as compared to 2013. For support PFS, the net profit increased by 39.6% and amounted to EUR 59.9 million at the end of 2014.

9 payment institutions
6 electronic money institutions

The number of payment institutions (+3 entities) and electronic money institutions (+1 entity) slightly increased in an emerging market which seeks its cruising speed. The CSSF noticed a certain interest from several players to establish themselves in Luxembourg to benefit from this market opportunity.

4,193 UCIs¹

114,237 units
Total net assets: EUR 3,127.7 billion
206 management companies
169 alternative investment fund managers (AIFMs)

In 2014, the UCI sector registered a 18.2% growth in net assets under management, originating for 51.7% from net subscriptions and for 48.3% from the positive performance of financial markets.

The number of UCIs improved again by +0.3% (i.e. +12 entities). Making up 45.2%, UCITS remain the majority in terms of number, closely followed by SIFs with 37.9%. In terms of assets under management, the UCITS still predominate with 82.4% of total net assets of UCIs, against 11.1% for SIFs. When taking into account umbrella funds, a total of 14,237 economic entities were active on 31 December 2014, which represents a new record.

With 206 active entities, the number of management companies authorised pursuant to Chapter 15 of the 2010 Law increased by 11 entities following 21 new authorisations and 10 deregistrations, most of which were due to the restructuring of different groups resulting in mergers and cessation of business. As evidenced by the 159 AIFM authorisations granted by the CSSF in 2014 (against 10 in 2013), 2014 was mainly characterised by players of the investment fund industry becoming with the AIFM Law.

32 authorised securitisation undertakings

As there was one new authorisation, the number of authorised securitisation undertakings increased by one entity in 2014. The balance sheet total of authorised securitisation undertakings also increased by EUR 4.2 billion and amounted to EUR 23.8 billion at the end of the year.

15 pension funds

The number of authorised pension funds rose by one entity in 2014. At the end of 2014, gross assets of pensions funds reached EUR 1,385 million, which represents a 62% rise compared to the end of 2013. The number of pension fund members also rose with 16,155 members as at 31 December 2014 (+17.5%). These substantial rises are mainly due to the creation of two new pension schemes within two existing pension funds.

Total employment in the supervised entities: 44,038 people
(of which banks: 25,785 people, investment firms: 2,390 people, specialised PFS: 3,431 people, support PFS: 9,043 people, management companies: 3,389 people)

Total employment in the financial sector went down by 0.4%, i.e. 184 people, during 2014. However, depending on the category of financial players, the situation diverges.

Employment in the banking sector fell by 1.7% which is largely due to the continued restructuring and consolidation of activities as well as to the cessation of activities of several banks. This decrease in staff could not be fully offset by the creation of jobs in the credit institutions which started their activities during the year.

The number of jobs in investment firms decreased by 6.6%. This development mainly reflects transfers of activities which, however, had no impact on the aggregate number of jobs in the financial sector, but only changed the breakdown among categories of entities. However, the staff of specialised PFS increased by 7.2%, in particular, as a result of a transfer of activities and the creation of new positions. Support PFS staff also increased, although only slightly, by 0.8%.

The positive development of the management companies’ staff (+4.2% in 2014) results from the creation of new entities, the staff increases of existing entities and the change of status of some entities leading de facto to a transfer of personnel.

1,731 prospectuses, base prospectuses and other approved documents
634 supervised issuers
0.96 million reported transactions in financial instruments

The number of files submitted in Luxembourg for the approval of prospectuses to be published when securities are offered to the public or admitted to trading on a regulated market rose compared to 2013 (+6.2%).

The CSSF supervises issuers whose securities are admitted to trading on a regulated market and whose home Member State is Luxembourg for the purposes of the Transparency Law. Their number reached 634, of which 224 Luxembourg issuers.

The supervision involves a general follow-up of regulated information to be published by issuers as well as the enforcement of the financial information, i.e. the assessment of compliance of the financial information with the relevant reporting framework, namely the applicable accounting standards.

As regards the supervision of markets and market operators, the CSSF received about 0.96 million reports on transactions in financial assets which allow the observation of market trends and the identification of possible offences. In the framework of the law on market abuse, the CSSF initiated two investigations in relation to insider dealing and/or market manipulation and dealt with 65 requests from foreign authorities.

138 on-site inspections and visits

In addition to the 26 introductory visits which take place, in principle, within the first six months of the authorisation of the new players of the financial centre and aim to accompany them in their business start-up phase, the CSSF carried out, in 2014, more than a hundred on-site inspections covering a wide variety of aspects such as liquidity risk, interest rate risk, the validation of credit risk and operational risk management models, credits, corporate governance, MiFID arrangements, the function of depositary bank, anti-money laundering and terrorist financing, the support PFS activity and the ad hoc missions relating to a specific, or even worrying, situation or isue within a supervised entity.

Public oversight of the audit profession

The public oversight of the audit profession covered 66 cabinets de révision agréés (approved audit firms) and 245 réviseurs d’entreprises agréés (approved statutory auditors) as at 31 December 2014. The oversight also included 48 third-country auditors and audit firms duly registered in accordance with the law of 18 December 2009 concerning the audit profession.

As regards the missions performed in the framework of statutory audits and other missions exclusively entrusted to them by law, the réviseurs d’entreprises agréés and cabinets de révision agréés are subject to a quality assurance review, organised according to the terms laid down by the CSSF in its capacity as supervisory authority.

637 customer complaints

Pursuant to its specific competence as regards consumer complaint handling, the CSSF received 637 complaints last year, most of which (46%) concerned electronic payment service issues. Both complaints regarding private banking and those relating to savings accounts and term deposits took the second place with 11% of the total processed complaints.

555 agents
Operating costs of the CSSF in 2014: EUR 66.6 million

The year 2014 was marked by the ongoing increase in the CSSF’s staff (+59 agents) in order to face the growing workload resulting notably from the implementation of the SSM at European level, the introduction of new prudential requirements and, in general, the increase in the volume and complexity of financial products. This figure is supplemented by the numerous on-site inspections, which became an important pillar of the prudential supervision exercised by the CSSF.