EDITORIAL COVER STORY...Banking menu 2018 2018 will be another year rich in regulatory changes impacting the banking sector. The Top-3 regulations affecting banks and its customers

Banking menu 2018

2018 will be another year rich in regulatory changes impacting the banking sector. The Top-3 regulations affecting banks and its customers in 2018 are MiFIDII, PSD2 and GDPR.

The second Markets in Financial Services Directives (MiFID II), implemented since 3 January, will have a profound impact on banks’ services, products and revenues in addition to increased governance and administrative burden.

Also, since the beginning of this year, the provisions of the second Payments Services Directive (PSD2) apply. Third Party Providers (TPPs) will need to identify themselves towards Account-servicing payment service providers (AS PSPs) and communicate securely with them. The banking community will as much as possible make sure that customer protection is guaranteed by secure interfaces.

The EU General Data Protection Regulation (GDPR), designed to harmonise data privacy laws across Europe, to protect and empower all EU citizens’ data privacy and to reshape the way organisations across the region approach data privacy, will come into force the 25 May 2018. GDPR will have a deep impact on all business across Europe, banks included.

On future regulations, the ABBL particularly insists on a rigorous impact assessment of Basel III that will determine the impact of these measures in the EU markets before any decision is made on enshrining the Basel III finalisation in EU regulation.

Generally, in order not to undermine the nascent economic recovery in Europe, the ABBL requests from policymakers to carefully calibrate the range of regulatory measures for banks that are nearing completion. Besides the finalisation of the Basel framework, the ABBL specifically means the completion of the EU Risk Reduction.

Besides regulatory matters, banks further step up commitment to financing growth with a priority focus on financing the energy transition and on the rapid shift in the banking sector. More broadly the banking sector reiterated its commitment to financing the real economy and expressed its specific support actions designed to improve the functioning of the European single market, including Capital Markets Union and the plans to deepen Economic and Monetary Union.

Finally, 2018 will be the crucial year where the Brexit framework has to be set and the future relations between the EU and UK determined.

Another year with an ambitious agenda.

EDITORIAL

Mr de Cillia, the ABBL has signed a memorandum

of understanding with the China Banking Association

to promote information exchange within the banking

industry, relating to the latest developments in

regulatory frameworks and successful practices in

investor protection. Are there any specific projects

that will be implemented in the near future?

Yes, a memorandum of understanding (MoU) is made

to foster exchanges between the two associations.

There are several current projects ranging from training

and education to more technical projects regarding

implementation of new regulation, and other future

projects that will be presented in due time. What we

do know is that the relations between the CBA and

the ABBL will go a step further, in the interest of all the

members represented by our two associations.

How will ABBL and the China Banking Association

promote market development, industry insight

sharing, and data exchange?

The CBA and the ABBL plan to exchange best practices

with regular meetings (timing to be defined), proactive

exchanges of information on topic of interests for both

associations, keep regular contacts and organize joint

events.

Luxembourg is very attractive to Chinese banks,

with seven Chinese banks already established in

Luxembourg. Besides offering Chinese banking

institutions entry to into European market, what other

advantages does Luxembourg provide?

According to the latest Global Financial Centre Index,

Luxembourg is among the top 3 financial centres in

the European Union. Contrary to many other financial

centres, the Luxembourg financial centre offers cross-

border expertise and spans a very diverse range of

activities: wealth management, fund distribution,

corporate finance, insurance, capital markets activities

and many others.

Chinese banks serve China based clients and help

them invest into Europe, and assist European clients

to invest in China. In addition to corporate banking

services, the Chinese banks have expanded into

capital market activities in Europe and asset and wealth

management, thereby serving as a bridge connecting

Europe and China.

The continuous opening of the Chinese bond market, the

third largest in the world, provides further opportunities

for Luxembourg RMB bond listing. In the beginning of

2017, China’s onshore bond market was included in the

Bloomberg benchmark indices. This is a further step in

attracting foreign investors to enter the Chinese bond

market. When Chinese companies plan to list RMB

bonds in continental Europe, the Luxembourg Stock

Exchange (LuxSE) is a natural choice, as it is the leading

stock exchange for Dim Sum Bond listings in Europe and

second globally behind the Hong Kong Stock Exchange.

With the growing awareness of environmental costs

imposed by the rapid growth of the Chinese economy,

interest in the Green Bonds has grown in recent years.

The Luxembourg financial centre is well positioned to

play a key role in this area due to its expertise in the field

of green finance.

The China Banking Association (CBA) and the Luxembourg Bankers’ Association (ABBL) sign a Memorandum of Understanding

LUXEMBOURGBANKINGQUARTERLY

012018

A publication of the Luxembourg Bankers’ Association

Serge de Cillia, CEO - ABBL

COVER STORY

An interview with the CEO of the ABBL, Serge de Cillia

What to expect in 2018?

On 26 September 2017, Yves Maas, Chairman of the Luxembourg Bankers’ Association (ABBL) and

Runzhong Huang, Secretary General representing the China Banking Association (CBA) have signed

a Memorandum of Understanding (MoU) between the two banking associations. The agreement

aims at establishing a regular communication and information sharing between the two banking

associations as well as at jointly organising professional events. ABBL and CBA will exchange on

all aspects of the banking industry, including but not limited to the latest development of regularly

frameworks and sound practices for investor protection.

On 13 January 2018, the second edition of the

Payment Services Directive will enter into force as

long as the Luxembourg legislator votes on it within

the prescribed deadlines. The new legal framework will

be supplemented over time by the implementation of a

set of technical specifications to be complied with (the

“Regulatory Technical Standards”).

In addition to extending the scope of the first edition,

the new legislation introduces new innovative services

for the benefit of users as well as payment service

providers (PSPs).

“In this perspective, and like the commissioning of the first edition of the PSD in 2009, the ABBL supports

its members in their analysis and interpretation of this directive through various working sessions bringing together the experts in payment of different banks and other PSPs.”

The critical point for traditional providers is that they will

have to allow the new PSPs - the Third Party Payment

Service Providers (TPPs) - having the necessary

approvals respectively having registered with the

competent authorities, to access the information of

their clients who request it. These service providers

will be able to offer clients particular information

aggregation services on their financial situation but

also enable them to initiate payments from accounts

of banking institutions.

If in the past the consultation of financial data on

payment accounts, or the initiation of a payment was

made through instruments and tools made available

by a bank, in the near future, the provision of these

payment services may actually involve several new and

current players.

Thus, it is essential that current PSPs, including banks,

identify the impacts and risks before applying the new

legal and regulatory framework to avoid jeopardizing

the level of user confidence in electronic payment

services.

In this perspective, and like the commissioning of the

first edition of the PSD in 2009, the ABBL supports

its members in their analysis and interpretation of this

directive through various working sessions bringing

together the experts in payment of different banks and

other PSPs.

Past meetings have helped to define a common

strategy, to raise certain issues with regard to the draft

law and have provided the Chamber of Commerce with

observations to include in its opinion. A task force has

also been set up to draw up a PSD2 guide for banks,

the purpose of which is to facilitate the integration of

certain key concepts and provisions of the directive and

the future Luxembourg legal framework.

“Everything is being done to help banks adequately and efficiently

prepare for the changes introduced by the new directive.”

Everything is being done to help banks adequately and

efficiently prepare for the changes introduced by the

new directive.

Contact Antoine Van den Bulcke Banking Technologies & Payments Adviser - ABBL

[email protected]

HOW DOES ABBL SUPPORT BANKS IN THE PSD2 ADOPTION?

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Luxembourg’s established position as a global cross-

border fund hub and leading listing centre, reinforces

the Grand-Duchy as an important offshore RMB financial

centre. Providing a platform for RMB product providers,

Luxembourg connects the onshore and offshore RMB

markets with European investors.

You mentioned previously that some companies might

transfer their businesses into the EU after Brexit.

From the perspective of banking industry, will Brexit

impact Luxembourg’s position as a European financial

center? Will Brexit offer any new opportunities to

Luxembourg?

It’s too early to assess the impact. Luxembourg just

wants to ensure continuity for all business actors and

avoid a cliff-edge effect that could impact the final client.

Financial institutions that serve the single market out of

London are facing uncertainty as regards the future of

their present set-up. Most of them need predictability

and legal certainty for themselves and their clients and

do not wait for the outcome of negotiations between

the EU and UK. Luxembourg has been contacted by

many financial institutions that are actively looking at

alternatives for the part of their business that will be

impacted by the loss of their EU passporting ability.

Some of the financial institutions that until now did

not have an EU – presence outside London, have

announced the set up of a new subsidiary, while those

that already had a presence in Luxembourg or in other

EU financial centres, are in the process of strengthening

their existing activities in the EU (i.e. JP Morgan and

Citi have said they would strengthen their presence

in Luxembourg amongst others). The timing of these

announcements is decided by the financial institutions

themselves and often depends on the regulatory

approval process.

With regards to Luxembourg, the following official

announcements have been made over the recent months:

M&G, in the investment fund business, AIG, Hiscox,

FM Global, RSA, CNA Hardy, Tokio Marine, Liberty in

insurance, and PPRO, as a payment service provider, have

announced to set up a new EU hub in Luxembourg to

ensure that they can continue to serve their EU customers.

Over the coming months, more companies will follow in

their footsteps. Besides asset managers, banks, insurance

and Fintech companies, a number of leading global private

equity will also establish their EU hubs and strengthen their

presence in Luxembourg as a consequence of Brexit.

More recently, banks such as Northern Trust and Julius

Baer have chosen Luxembourg for their European hub

as well.

Given its long-standing track record as a partner to the

UK-based financial services industry, Luxembourg is

seen as a natural choice for any financial institution that

wants to continue to serve the EU market in the future.

ABBL FOCUS ON SUSTAINABLE FINANCE

The COP 21 Agreement signed in Paris by 185 Countries in 2015 marked a turning point in the scale of sustainable finance. Since then, particularly in Europe, we witnessed a joint commitment of governments, regulators, international organizations, private sector and, not least, financial institutions in fighting against climate change and contributing to a sustainable economy.

This is also true in Luxembourg where the government and the financial center’s ecosystem have been working together in a dedicated Task Force contributing to the international fight against climate change and promoting Luxembourg’s role as an international center for climate finance.

“Undoubtedly, banks have a major role to play in the financing of the economy given their unique position in collecting,

transforming and channeling the available liquidity to borrowers as well

as managing the associated risks to the benefit of financial stability.”

At the same time, financing sustainable projects requires an effective public-private cooperation and an alignment of public strategies with the needs of the private sector.

“In this context, the ABBL is very eager to support its members in contributing

to a sustainable economy and the transition to a more sustainable financial

system.”

Our recent “sustainable finance survey” conducted among our members (51 answers col lected, representing the main financial institutions in Luxembourg), revealed that:

The vast majority (85%) of financial institutions who answered the questionnaire already incorporate social and environmental elements in their vision and strategy and are signatory of global / local sustainability initiatives;

More than 65% of respondent banks offer green finance to their clients (responsible investment funds, microfinance, sustainable investment management);

The main reasons for adopting sustainable finance are mainly linked to brand recognition (76%), stakeholder requirements (64%) and shareholder requirements (64%);

There are still some barriers Luxembourg banks have to face in order to introduce sustainable finance into

their service offering: lack of profitability (25%), lack of policy (25%) and length of payback period (25%). Interestingly enough, 25% of the respondents also declared that they do not see any barriers in this sense (25%);

On the client side, banks are experiencing a growing appetite for green products (28%);

Respondents also expressed their interest in the creation of a special working group dedicated to sustainable finance (60%).

As a result, the ABBL board decided last November to establish a working group in order to bring together and combine all the professional expertise and experience present in the Luxembourg financial centre for:

Defining an ABBL global strategy in the field of sustainable finance (identification of priorities and concrete projects);

Contributing to the work done at European level as well as locally;

Establishing a platform to share views and opinions;

Promotion: raising awareness;

Education: providing training courses.

Bearing in mind that protecting, financing and contributing to the future generation interests starts today!

Contact Fabio Mandorino Adviser, Commercial & Private Banking - ABBL

[email protected]

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Luxembourg Green Exchange

Structured Climate Funds

CONSOLIDATION

Luxembourg/EIB Climate Finance

Platform Luxembourg/IFC

Partnership

STRATEGIC PARTNERSHIPS

Climate Finance label for

investment funds

Green bond label

QUALITY CONTROL

Climate Finance Accelerator

for innovative, climate savvy fund managers

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ENABLING LEGAL AND REGULATORY ENVIRONMENT

COORDINATED PROMOTION AND COMMUNICATION

Source: LFF brochure on Sustainable finance

10TH ANNIVERSARY OF THE PRIVATE BANKING GROUP, LUXEMBOURG (PBGL)

On 14 November 2017, the ABBL’s Wealth Management dedicated cluster, the Private Banking Group, Luxembourg (PBGL), celebrated its 10th Anniversary in the presence of Mr. Pierre Gramegna, Luxembourg Minister of Finance, who gave an opening speech.

Around 130 bankers and stakeholders, representing the complete Luxembourg financial ecosystem, attended the event hosted by BGL BNP Paribas in their new premises.

As the oldest business cluster of the ABBL, the PBGL regroups some 56 member banks currently active in Private Banking in Luxembourg as well as several non-banking members (law firms, consultants, and other sector related companies).

A decade of existence marked the perfect occasion for founding and current members of the PBGL to

remember the initial feelings and wishes, still present today, in all achievements realized by the cluster over time. Over the years, the PBGL has gradually become the voice of Private banking in Luxembourg, among others by:

Mapping the business sector’s contours and evolution, with the annual Private banking Surveys in close collaboration with the CSSF,

Setting a number of standards in terms of ethics (by signing the ICMA Charter in 2012) and education (by launching education programmes with the IFBL and the Luxembourg School for Finance), and

Actively promoting in the sector in Luxembourg and abroad as well as ensuring an ongoing dialogue with the entire financial ecosystem.

They key speakers at the event commented on the evolution of client profiles and needs, more sophisticated and internationally exposed, demanding enhanced and immediate access to reliable and transparent financial information, as well as the evolution of the client adviser profile, towards a more segmented holistic client approach and advisory processes, underpinned by the knowledge and expertise to identify the need for asset structuring and estate planning.

They further recognised and were delighted to witness the country’s ability to reinvent itself by adapting to the

regulatory shift toward tax transparency and successfully targeting the global market.

Looking forward, the speakers outlined a number of challenges ahead and ambitions to pursue for the Private Banking sector in the coming years, such as the digitalisation of the wealth management service offering, grooming new talents and educating staff as well as maintaining a competitive and efficient Luxembourg toolbox.

A final keynote took a deeper look at expectations from a wealth management client’s perspective, encouraging private bankers to live up to a new service culture (being available, mobile, proactive and customized, investing in people) in order to respond to the increasing needs of all generations, from young millennials to baby boomers).

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17/11/2017

JOINT DECLARATION ON TELEWORK IN THE EUROPEAN BANKING SECTOR The new Joint Declaration on Telework in the European Banking Sector was signed by the European Social Partners on Friday, 17 November 2017. Although it is not a legally binding instrument, it is very rich in information.

The Joint Declaration on Telework deals with the different issues related to telework. The purpose of the working group was as much as possible to take into account the interests of the various play-ers in the banking sector, and especially the different situations of teleworking existing.

26/11/2017

ABBL AMID LUXEMBOURG’S STATE VISIT TO JAPAN From November 26th to December 1st, on the occasion of the HRH, Grand Duke’s Official visit to Japan, the ABBL took part in the official delegation led by H.E. Mr. Etienne Schneider, Deputy Prime Minister and Minister of the Economy and H.E. Mr. Pierre Gramegna, Minister of Finance. In addition to several fruitful and well organized seminars, ABBL delegation composed of Yves Maas (Chairman) and Serge de Cilllia (Chief Executive Officer) took the occasion to visit the Japanese Bankers Association in order to discuss and exchange views on sev-eral topics, ranging from the future of banking, to banking regulation.

05/12/2017

ABBL & ALRIM RISK MANAGEMENT CONFERENCE On 5 December 2017, the risk management community has been invited to the 2nd edition of the ABBL & ALRiM Risk Management Conference. Law makers, supervisors, banking experts and leading practitioners shared insights on the latest trends in banking risk management with 130 banking professionals attending. The main focus was set on the new banking regulation package (CRR 2/CRD 5/BRRD 2) and the Supervisory Review and Evaluation Process (SREP).

EDITORABBL Communication Department

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IN SHORT

and results from the explicit demand originating from ABBL members. The online platform provides basic in-formation about FinTech firms legally present and com-mercially active in Luxembourg regardless of their own-ership type, size, age and other criteria. Furthermore, the map outlines and categorizes major stakeholders of Luxembourg’s FinTech ecosystem in the following areas:

Funding and support for startups and established firms

Education and training

Public policy

Promotion of professional interests

Research and development

Media

Organization of events

Since the launch of the project on October 10th, 2017, visitors from all over the world consulted more than 11,500 pages of the FinTech Map of Luxembourg, and this figure is constantly growing.

The ABBL’s team believes that the FinTech map will fa-cilitate a higher degree of interactions among all actors dealing with FinTech and technological innovation in financial services in Luxembourg, including banks and other established entities, and will contribute to the at-tractiveness of the Luxembourg’s FinTech ecosystem in Europe and globally.

The ABBL invites its members and all other stake-holders to explore the FinTech Map of Luxembourg and proceed forward with digital transformation and FinTech projects: www.fintechmap.lu

MORE INFORMATION BY SCANNING THE QR CODE

ABBL’S FINTECH MAP OF LUXEMBOURG: MAKING NATIONAL FINTECH ECOSYSTEM MORE VISIBLE

ABBL’s Digital Banking and FinTech Innovation (DBFI) Cluster successfully proceeds forward with the Innovative Workshops initiative launched in the begin-ning of 2017.

The goal of various workshops organised by the DBFI Cluster is to provide a pragmatic and easy to implement advice to ABBL members in the context of changing market trends, technological and regulatory environ-ment. Each set of workshops is expected to end up with a specific deliverable, for instance, guidelines, tips and tricks, approaches and methodologies, examples, checklist and so on.

The workshop is an interactive exercise allowing each participant to raise questions, share her / his own views and even brainstorm to find answers to the questions that are most important to ABBL members. The num-ber of participants for each workshop is usually limited to 20-25 participants. A knowledgeable and experi-enced keynote speaker is invited to each workshop to update workshop participants on the topic, to moder-ate the discussion in small groups and to respond to the most challenging questions.

Since May 2017, following the results of a preceding survey conducted among ABBL members, the DBFI Cluster organised 16 workshops within the two major streams of topics: General Data Protection Regulation (GDPR) and KYC / AML / Digital Onboarding. The variety of speakers coming from banks, market infra-structure institutions, law firms, consulting companies, technology providers and FinTech firms conducted workshops on the following subjects:

Practical Implementation Choices of GDPR

The impact of GDPR on Retail Banking

Defining What Personal Data is

The Right to be Forgotten and the Blockchain

Hashing, Blockchain and other Technologies towards GDPR Compliance

Consent by the Data Subject

Technologies for Customer Profiling

Data Portability: Standards and Formats

Overview of Existing Technological Solutions for GDPR Compliance

Data Protection Officer in Financial Services: Job Description

Privacy by Design: Technological and Organisational Approaches

Achieving New Client Onboarding in Less Than 5 Minutes

Digital Onboarding: Respecting eIDas Compliance

Trusted Authentication and Biometrics for Digital Onboarding

Outsourcing KYC / AML Activities: Weighing the Risks and Opportunities

Video Onboarding in Financial Services: Process, Compliance and IT Aspects

The feedback obtained from all workshop participants is very positive and led to the creation of some tan-gible outputs. For example, the DBFI Cluster devel-oped GDPR Frequently Asked Questions thanks to the support of Open Reply and the National Commission for Data Protection. The document is available on-line and is aimed at providing basic knowledge on the new set of GDPR legislation applied in the con-text of financial services: https://www.abbl.lu/topic/general-data-protection-regulation/

Innovative Workshops are open to every ABBL mem-ber and ABBL’s FinTech Service Pack user. If you wish to conduct or participate in a workshop, please do not hesitate to contact Andrey Martovoy, FinTech Adviser ([email protected]).

The DBFI Cluster prepares new workshops for 2018. Please, follow ABBL’s agenda (https://www.abbl.lu/agenda/) to stay tuned!

Contact Andrey Martovoy FinTech Adviser - ABBL

[email protected]

ABBL’s INNOVATIVE WORKSHOPS: BRIDGING THE GAP BETWEEN NEW FINANCIAL TECHNOLOGIES AND THE BUSINESS AS USUAL

The Luxembourg Bankers’ Association (ABBL) devel-oped the FinTech Map of Luxembourg and made it freely available online: www.fintechmap.lu

The map is the contribution of the ABBL and its Digital Banking and FinTech Innovation Cluster helping all interested parties to better understand and follow the constantly growing and enhancing FinTech ecosystem of Luxembourg.

This initiative is aimed at mapping and classifying vari-ous FinTech firms, software vendors and IT solution pro-viders for the financial services sector of Luxembourg

DBFI ACTIVITIES

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