Publication of the Annual Report 2015 of the CSSF

The report on the CSSF’s activities and the development of the financial centre in 2015 has just been published.
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 on the website www.cssf.lu. An English version of the report will be published on the website in September 2016.
The 2015 trends for the different financial centre segments may be summarised as follows.

International aspects of supervision

Following the achievement of the first pillar of the Banking Union in 2014, i.e. the setting-up of the Single Supervisory Mechanism (SSM), the integration of the banking systems of the euro area continued in 2015 with the preparation of the entry into force of the second pillar of the Banking Union, i.e. the Single Resolution Mechanism (SRM).

The year 2015 was the SSM’s first year of operation and the CSSF’s organisational structure has proven to be well suited for the performance of its duties as a member of the SSM. Besides the CSSF’s participation in the prudential supervision of Luxembourg significant banks and in the Joint Supervisory Teams, it contributed to the work of the various consultative bodies and support functions of the ECB. In particular, the CSSF participated in the SSM’s decision-making process at the level of the Supervisory Board.

The CSSF is also actively involved in the indirect supervision by the ECB of less significant banks whose primary objective is the day-to-day cooperation between the ECB and the national competent authorities and in initiatives focussing on the development of common supervisory standards and methodologies.

The work of the European Supervisory Authorities EBA, ESMA and EIOPA with the aim of harmonising regulations and implementing the regulatory and implementing technical standards continued in 2015.

143 credit institutions
Balance sheet total: EUR 743.19 billion
Net profit: EUR 3,987 million

The number of banks decreased by one entity to 143 as at 31 December 2015. Four banks started their activities whereas five banks ceased their activities during the year.

The aggregate balance sheet total amounted to EUR 743.19 billion at the end of 2015, representing a 0.8% growth compared to 2014. Following the declines in activity recorded in 2013 (-2.9%), in 2012 (-7.3%) and in 2010 (-3.8%), the banking sector increased slightly, as evidenced by the balance sheet total. This growth is shared by 63% of the banks of the financial centre.

Net profit of the Luxembourg banking sector reached EUR 3,987 million as at 31 December 2015 (-6.3% compared to 2014). This evolution is mainly due to three combined effects: growth in banking income as a result of a general increase of all its components, sharp rise of the general administrative expenses and year-on-year doubling of provisions.

309 PSF (107 investment firms, 124 specialised PSF, 78 support PSF)
Balance sheet total of investment firms: EUR 6.00 billion; specialised PFS: EUR 7.34 billion; support PFS: EUR 1.1 billion
Net profit: investment firms: EUR 253.3 million; specialised PFS: EUR 194.1 million; support PFS: EUR 68.1 million

Following a turbulent year in 2014 in terms of authorisations and status withdrawals, the PFS sector gained some renewed stability in 2015. However, with 13 entities authorised in the course of the year, as against 19 status withdrawals, the number of PFS in all categories combined decreased by six entities. The net development in number thus turned negative for investment firms (-4 entities) and support PFS (-3 entities) whereas the number of specialised PFS increased by one entity.

The aggregate balance sheet total of investment firms soared to reach EUR 6.00 billion (+64.5%) as at 31 December 2015, which is mainly due to one financial player authorised in 2015 and with a very high balance sheet total. The drop in the aggregate balance sheet total of specialised PFS which amounted to EUR 7.34 billion at the end of 2015, i.e. -31.9% as compared to 2014, is due to one large entity being taken over during the year within the context of a cross-border merger. The aggregate balance sheet total of support PFS increased by 5.1% to EUR 1.1 billion as at 31 December 2015.

The net profit of investment firms rose significantly (+73.0%). This is attributable, in particular, to the significant profit of one financial player. However, it should be borne in mind that nearly one third of investment firms recorded a negative result in 2015. The aggregate net result of specialised PFS registered a considerable decrease of 44.1%, which is mainly attributable to two significant entities. Excluding these entities, the aggregate net results of the other specialised PFS showed an upward trend. For support PFS, the net profit increased by 13.7% and amounted to EUR 68.1 million at the end of 2015.

10 payment institutions
5 electronic money institutions

The number of payment institutions (+1 entity) and electronic money institutions (-1 entity) did not change much 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.

4,160 UCIs¹
14,496 units
Total net assets: EUR 3,543.6 billion
414 authorised investment fund managers
619 registered investment fund managers

In 2015, the UCI sector registered a 13.3% growth in net assets under management, originating for 72.4% from net subscriptions and for 27.6% from the positive performance of financial markets.

However, the number of UCIs fell by 0.8% (i.e. -33 entities) mainly because of a trend towards concentration in this area. Making up 45.5%, UCITS remain the majority in terms of numbers, closely followed by SIFs with 38.5%. In terms of assets under management, the UCITS still predominate with 83.2% of total net assets of UCIs, against 11.0% for SIFs. When taking into account umbrella funds, a total of 14,496 economic entities were active on 31 December 2015, which represents a new record.

32 authorised securitisation undertakings

Taking into consideration two authorisations and two withdrawals, the number of authorised securitisation undertakings remained stable in 2015. The balance sheet total of authorised securitisation undertakings increased by EUR 6.5 billion and amounted to EUR 30.3 billion at the end of the year.

14 pension funds

The number of authorised pension funds dropped by one entity in 2015. As at 31 December 2015, gross assets of pension funds reached EUR 1,440 million, which represents a 4.0% rise compared to the end of 2014. However, the number of pension fund members decreased to 15,448 as at 31 December 2015 (-4.4% as compared to 2014). This fall is mainly owed to the transfer of a pension fund to an insurance product outside the supervision perimeter of the CSSF.

Total employment in the supervised entities: 44,993 people
(of which banks: 25,942 people, investment firms: 2,278 people, specialised PFS: 3,787 people, support PFS: 9,218 people, management companies: 3,768 people)

Total employment in the financial sector went up by 2.2%, i.e. 955 people, during 2015. However, depending on the category of financial players, the situation diverges.

Employment in the banking sector was almost unchanged from the year before (-0.1% as compared to 2014).

The number of jobs in investment firms decreased by 4.7%. 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 specialised PFS staff increased by 10.4% as a result of three related factors, i.e. significant staff increase of several players operating in the maintenance of register and central administration of investment funds, job creation by specialised PFS that extended their authorisation during the year and job creation by specialised PFS authorised in 2015. Support PFS staff also increased, albeit more slightly, by 1.9%.

The positive development of the management company staff (+11.2% in 2015) mainly results from the growth in the staff number of already existing entities, some of which have strengthened their structure following an increase of activities while one entity benefited from a staff transfer following a transfer of activity within the group to which it belongs.

1,569 prospectuses, base prospectuses and other approved documents
573 supervised issuers
0.77 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 decreased compared to 2014 (-9.4%).

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 573, of which 193 Luxembourg issuers. The supervision involves a general follow-up of the 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 0.77 million reports on transactions in financial assets which allow observing market trends and identifying possible offences. In the framework of the law on market abuse, the CSSF opened three investigations in relation to insider dealing and/or market manipulation and dealt with 70 requests from foreign authorities.

139 on-site inspections and visits

In addition to the 25 introductory visits, which, in principle, take place within the first six months of the authorisation of new players of the financial centre with the aim to accompany them in their business start-up phase, the CSSF carried out over a hundred on-site inspections in 2015. These on-site inspections covered a wide variety of aspects such as interest rate risk, operational risk, validation of credit risk and operational risk management models, credits, corporate governance, MiFID arrangements, the function of depositary bank, the function of central administration of UCIs, anti-money laundering and counter-terrorist financing, support PFS activity, market abuse. The CSSF also carried out ad hoc missions relating to a specific, or even worrying, situation or issue 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 276 réviseurs d’entreprises agréés (approved statutory auditors) as at 31 December 2015. The oversight also included 44 third-country auditors and audit firms duly registered in accordance with the law of 18 December 2009 concerning the audit profession.

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 within the context of statutory auditing and any other assignments entrusted exclusively to them by law.

584 customer complaints

Pursuant to its specific competence in consumer complaint handling, the CSSF received 584 complaints last year, most of which (46%) concerned electronic payment service issues. Complaints related to private banking came second with 13% of the total complaints handled.

628 agents
Operating costs of the CSSF in 2015: EUR 81.7 million

As in the previous year, 2015 was marked by a considerable increase of the CSSF’s human resources (+73 agents) in order to face the workload, in particular, arising from the operation of the SSM at European level, the introduction of new prudential requirements, the growing importance of on-site inspections within the context of prudential supervision, the extension of the CSSF’ tasks (macroprudential supervision, resolution, protection of depositors and investors) and, in general, higher volumes and increased complexity of financial products.