Luxembourg Presents Financial Centre Action Plan

by Ulrika Lomas, Tax-News.com, Brussels

11 February 2011

Luxembourg’s Finance Minister Luc Frieden has recently presented details of work carried out by the High Committee responsible for the country’s financial centre, and unveiled details of the key development axes for the financial centre in 2011.

By way of introduction, Finance Minister Frieden described the international context. In his analysis, Frieden explained that Luxembourg’s financial centre, which has experienced continuous rapid development over the course of the last ten years thanks to the establishment of an appropriate legislative framework, now finds itself confronted with two major phenomena:

• Firstly, with the recasting of the international financial architecture in the wake of the global financial crisis;
• Secondly, with the emergence of new actors and increased competition at international level.

According to the Luxembourg finance minister, in view of the current international context, the government’s objective is to firmly anchor in Luxembourg an international, competitive, innovative, and diversified financial centre. The development of the financial centre, the backbone of the country’s economy, is a priority, he emphasized.

Determined to ensure that Luxembourg’s financial centre maintains its major strengths, Frieden has set up the financial centre High Committee. Chaired by the finance minister, the committee brings together regulators, professional associations, major law firms and trustees as well as members of the government.

Designed as a “think tank,” the committee is a consultative body, which aims to better coordinate all efforts to promote the financial centre. According to Frieden, it is vital to be well informed, to carry out a detailed analysis of developments taking place in order to identify challenges and to initiate concrete action.

While underlining the importance of infrastructure for the centre, which, he noted, merits further in-depth analysis, Frieden outlined an action plan based on the five pillars which characterize the financial centre:

• Wealth management;
• Asset management and investment funds;
• International credit operations;
• Insurance;
• The financing structure.

In his report, Frieden highlighted the importance of strengthening Luxembourg’s financial centre position in Europe as well as the importance of seizing opportunities presented as a result of globalization, by attracting not only new clients but also by becoming established in new markets such as South America and Asia.

Consequently, Frieden put forward the idea of completing the range of financial products on offer in Luxembourg, notably by looking to the UK’s trust model or to foundations in The Netherlands. The strategy is, the minister continued, to build on past achievements while at the same time introducing new financial products and services and creating new opportunities.

Citing investment funds as the second example, the finance minister underlined his commitment to strengthening Luxembourg’s leading position in this area, through alternative investment funds.

Given the entry into force of a new European regulatory framework for alternative investment funds, Frieden expressed the government’s aim to ensure that Luxembourg’s expertise in the area of fund administration is consolidated, while at the same time developing “front office” activities.

Frieden also announced a series of fiscal measures designed to strengthen the attractiveness of the financial centre for management companies.

Finally, Finance Minister Frieden evoked the idea of creating a regulated status for insurance professionals to facilitate the development of business support services necessary for the management of insurance companies and reinsurance specialists.

In order to identify major global trends in the world of finance, Frieden revealed that a sub-group to the High Committee, a “regulatory watch,” would be set up tasked with monitoring and identifying European and international regulatory developments. The structure is to be complemented by the introduction of a “market watch” sub-group, designed to identify major trends and developments in the area of finance.

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