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JULY-AUGUST 2011 / 05

Beyond Luxembourg’s promotion strategy FINANCE INTERVIEW | Ernst Wilhelm Contzen, Chairman of the ABBL




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T. +352 26 10 86 26 F. +352 26 10 86 27 E. Internet: Eric Busch Publisher The Editorial Staff Delphine Reuter Sub-editor T. +352 26 10 86 26 Raphaël Henry Journalist M. +352 691 99 11 57 Editorial Committee Editorial Guest Estelle Hirtz Émilie Mounier Sales Manager M. +352 691 99 11 56 Loïc Pazour Project Manager M. +352 691 99 78 61 Alexandre Trân Web Project Manager M. +352 661 16 44 70 Photography Sébastien Héraud Photos Finance Nation Layout Piranha et Petits Poissons Rouges Subscription Luxembourg 45,- € - Europe 55,- € FinanceNation Luxembourg IBAN LU53 0030 7526 7288 1000 BIC BGL: BGLLLULL TVA LU 19730379 RC Luxembourg B 95210 Maison d’éditions - Autorisation d’établissement N° 102739 © Toute reproduction, même partielle, est soumise à l’approbation écrite préalable de l’éditeur. Tous droits réservés.

Anything between 34,000 and 204,000: that is how many KIIDs could be present on Finesti’s website when the deadline of July 2012 is reached and simplified prospectuses are entirely phased out. By 27 June 2011, Finesti, a branch of the Luxembourg Stock Exchange, said fourteen KIIDs were published on its website. The KIID, or Key Investor Information Document, has joined the pack of regulations aimed at targeting the financial industry’s weaknesses. One cannot talk about the future of Luxembourg without mentioning a new directive, an upcoming deadline, or a new circular that might affect the financial industry. But the KIID is more than a mere attempt at squeezing information on a two-pager. It also symbolises the industry’s efforts to improve these products’ transparency; if you do not speak the investor’s language, the KIID is vital to communicate. Luxembourg was the first country to transpose into national law the EU directive prescribing the KIID. More or less everything has been planned for it to be a success. But a key aspect is often overlooked: the quality of translations. How else than by hiring the right guys to do the job, can you ensure the clarity, precision, and conciseness of the information provided to investors? Many companies offer translation services, but customers need to know what exactly they pay for: what training do the translators get? What technology do they use? Will the translation be outsourced? More needs to be done to improve price transparency, to professionalise the sector and to ensure service quality. At a time when not only Luxembourg but all Member states plan the future of their financial industry with acronyms that sound like an alphabet soup to neophytes, improving transparency is at the heart of the industry’s evolution, and translation is also part of it. 

By Delphine Reuter

JULY-AUGUST 2011 / 05

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32 - Focus: The financial translators

Ernst Wilhelm Contzen, Chairman of the ABBL




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FINANCE INTERVIEW Ernst Wilhelm Contzen, Chairman of the ABBL 6



The evolution of the ABBL Since the Luxembourg’s Bankers Association was founded by ten banks in 1939, the ABBL has evolved to fully embrace the role of the financial industry’s main representative body. So much so that if the ABBL was created today, it would probably be given another name. The acronym of Luxembourg’s largest professional association would most likely also include the letters L, A, and C - given the growing number of law, audit, and consultancy firms which are joining its ranks. No man is as aware as Ernst Wilhelm Contzen of the need to join forces within and around the ABBL to support the growth of Luxembourg’s financial sector. On the day of his nomination as Chairman of the ABBL in April 2010, Mr Contzen, who is also CEO of Deutsche Bank and president of PROFIL, pledged to tighten the ties with the Central Bank of Luxembourg (BCL) and the CSSF. In May 2011, the ABBL moved to the House of Finance in Kirchberg with the main other associations of the financial sector, while working closely with the BCL and the CSSF on providing Luxembourg with ad-hoc regulations. But many more challenges lie ahead for the ABBL to address the deep changes Luxembourg needs.



FINANCE INTERVIEW Ernst Wilhelm Contzen

Mr Contzen, how does the ABBL’s evolution reflect Luxembourg’s? The ABBL (Association des Banques et Banquiers, Luxembourg) has evolved constantly over the last few years to adapt to a changing regulatory and business environment. The activities of the Luxembourg financial centre are very diverse, and the ABBL has to continuously evolve to reflect this diversity. In 2001, we opened the doors of the association to other professionals. We thought that it would be beneficial not only to have Luxembourg banks on board, but also the auditors, the lawyers, the PFSs, the consultants, and the accountants. It made sense for these sectors to join us because we work very closely together on a range of issues. Luxembourg now has international standards comparable with other international financial centres like London, Frankfurt or Zürich. Clients who come to Luxembourg to do business know that they will receive high quality advice and a full range of services.

The scope of the ABBL’s activities is very broad. We have to monitor and deal with every new legislative text. While laws in our field mostly originate in Brussels these days, they still need to be implemented here into national law. Luxembourg has always made sure that they are transposed smoothly, often giving us a first-mover advantage. As an association we have significantly assisted consecutive governments in this work. The ABBL is, moreover, providing continuous advice to its members. They are the most important stakeholders of the association. We are here to serve them, and that’s why we currently employ 39 people within the ABBL. We know that it is important to listen to our members. The creation of clusters to better represent the business lines of our members, such as private banking or retail banking, is a good example of this. In May, we moved to the new House of Finance together with the Association of the Luxembourg Fund Industry (ALFI), the

In addition, we are facing a true wave of regulations. We have the challenging task of preparing the Luxembourg financial centre for this regulatory environment in a climate of general distrust vis-à-vis the world of finance. Moreover, Luxembourg currently has a very high standard of living and to keep it up, we will have to work very hard. The banks’ revenues will decrease and this phenomenon will be cyclical. Of course, we cannot predict how a given year is going to turn out. For example, we had a net result of EUR 4.7 billion in Luxembourg before the crisis. But after the Lehman collapse, our earnings dropped to EUR 218 million. Now, we are back to the level of earnings of 2005. Last year’s earnings were sound because we did not have as many write-downs as during the crisis. But it is not over. You just need to take a look at what is going on around us: all banks have bought bonds from Greece, Portugal or Spain. There are a lot of uncertainties surrounding these

“In the aftermath of the crisis, we have to regain customers' trust. Money is a commodity, but it is a very sensitive one.“ Increased European harmonisation and international regulation have also had an impact on the way our association operates. In 2006, the ABBL, together with the Association of the Luxembourg Fund Industry (ALFI), opened a joint office in Brussels. Lobbying has become an increasingly important aspect of our work. It is crucial that the people who write laws and regulations, such as the Commission or civil servants, are made familiar with the reality in the field. This is why we need to have our ear on the ground from the earliest stages of the life cycle of a regulation onwards. We recently increased this office to two full-time employees, as the regulations coming out of Brussels are decisive for the development of our industry.



Association of insurance companies (ACA), the ATTF (Financial technology transfer agency), LFF (Luxembourg for Finance), the IFBL (Institute for training in banking) and the Fondation de Luxembourg. We’ll now all be together in rue Erasmus, just opposite the Chamber of Commerce, where we already hold a majority of our conferences. It was a common desire of the Chairmen to share an office together. This way, our associations can work more closely together and improve communication. What is the biggest challenge for Luxembourg’s financial sector? We all know what lies ahead. The reputation of banks and of the financial sector has suffered as a result of the financial crisis.

countries. If we have to pay for that too, then the results of our banks will dramatically change. We also need a change of mentality in Luxembourg. We need to move away from our illusion of invulnerability. We cannot go on pretending that things will continue to be the way they were before. I have been in charge at Deutsche Bank for 13 years. When I got there, the growth rate of this country was at 4.5 percent, while the average in Europe was 2 percent. Luxembourg’s growth has always been higher than the average. But today this has changed, and the government needs to tell the truth to the Luxembourg people: we cannot keep spending money at the same rate as we did before. The State should start compensating

Ernst Wilhelm Contzen FINANCE INTERVIEW

its reliance on revenues by cutting costs. This country’s well being heavily relies on the performance of the financial sector. Without a financial industry, the hotel and restaurant industry, law firms, as well as many other companies and sectors, would be far less profitable. The financial sector is still the most important sector, and as things stand at present, it will be difficult to achieve sufficient diversification in the near future. Luxembourg is too expensive for industrial firms, for instance. Politicians might take this up. But realising things is one thing, and making them happen is another. I agree 100 percent. How do you work on a political level?


Already founded in 1939, the ABBL is well established within the social and political fabric of this country. When there is a savings directive, MiFID, Basel II and III, a payment services directive, AIFMD, etc., the ABBL takes a leading role in Luxembourg’s preparation and the implementation into national law. We work very closely with the government, especially with the Minister of Finance, Luc Frieden; the CSSF and also the BCL. We have to work in the best interest of our members and the financial centre. We also need to provide ideas. I see the ABBL as a think-tank. We are represented in the Haut comité de la place financière, a consulting body presided by Mr Frieden himself. This illustrates how important this committee is. Before, we had the Comité pour le développement de la place financière de Luxembourg, or “Codeplafi”, which was run by the Director general of the CSSF. Now we can put forward our ideas and our wishes directly to Minister Frieden, and he can take decisions based on the information and suggestions we provide. We meet every two months. All the important issues that concern the financial sector are discussed there. We set up working groups with clear deadlines, and they need to deliver results. All the stakeholders of the financial centre






Ernst Wilhelm Contzen FINANCE INTERVIEW

are working together in defining common projects and monitoring important issues in the interest of the financial sector and the country. ABBL members also approach me with their suggestions and demands, which we collate and then present to the government. This is my task. It is of course a very delicate one, but I do it with pleasure. I get the opportunity to learn every day by meeting and talking to very interesting stakeholders. I also sit on the boards of various companies. I always say, every job is easy, all you need is 30 years of experience to do it. Does this type of committee not exist in other countries? They perhaps also have round tables. But here, it has the advantage of really being

ters are very important to the day-to-day work of the association. The technical input, the know-how as well as the expertise of professionals in the field is invaluable. For example, we have a private banking group, a retail banking group, a depositary bank forum together with ALFI, as well as several committees dealing with various domains ranging from banking supervision to social affairs. Committees and clusters also set up their working groups to deal with very specific subjects in more detail. In terms of strategy, we have to constantly evaluate how we handle the competition: Singapore, Switzerland, Hong Kong, Frankfurt, Paris, Dublin, etc. As an association, we not only have to deal with the present, but we also have to think about the future. Importantly, in the aftermath of the crisis, we have to regain the trust of the customers.

lation, and being an EU member country is a competitive advantage in this respect. In Luxembourg, we can go to the regulators and to the highest-ranked civil servants, and provide them with our input. They can then assess this and give the green light. Why is the mutual fund industry so important here? Because over the years we have developed products that are renowned for their quality. We have the so-called “European passport”, which has become an internationally recognised quality label, allowing us to distribute our UCITS funds globally. This is very important. The customer knows that if he buys a mutual fund from Luxembourg, he can rest assured that he has invested in a good product. UCITS is like Coca-Cola: a global brand. And Luxembourg is a main distributor of this global brand.

“UCITS is like Coca-Cola: a global brand. And Luxembourg is a main distributor of this global brand.” institutionalised. Everybody is aware that for the next meeting we’d like to see results, so we can go further. We are, for example, discussing concrete measures to attract new fund managers to come live and stay here. We also plan promotion efforts, which in turn are coordinated by LFF. This is very important for us; we sit around one table, it’s very productive. As high-level professionals in our various fields we get to share our experiences, ideas and best practices. How important are the ABBL’s working groups in your overall strategy? We have our own Board composed of 25 people representing the biggest banks, covered bonds issuing banks, medium-sized banks, lawyers and auditors. We have some committees directly at Board level, such as a governance board committee headed by myself and an audit board committee headed by the CEO of Société Générale. Our working groups, committees and clus-

Money is a commodity, but it is a very sensitive one. We can bring this trust back with quality products that the customer can understand. If we sell products for which you need explanations from a maths professor, then we are not doing our job properly. This is, of course, partly what caused the crisis: products were too complicated, and people did not understand them, even when things were well explained. We all make a living off our customers. In a very real sense, they are our most important asset.

Take us into your promotion strategy.

What else is needed in Luxembourg to attract and secure the loyalty of customers?

I believe that we should speak with one voice. If we do not, people will not understand our message. LFF is our marketing voice; it’s a strong partnership between the government, the ABBL, the ALFI, the Chamber of Commerce, and other stakeholders. If you have 20 different brand names, the customer gets confused. The advantages of Luxembourg must be presented in a concise and consistent manner: planning security and legislation, for instance. It’s worth mentioning that taxation only plays a marginal role.

Customers want to know that their money, their investments are safe, and Luxembourg provides this safety and peace of mind. Wealthy private customers as well as institutional customers, like pension funds and insurance companies, need planning security. Customers also rely on solid regu-

We compete with the United States, and the Americans have a tendency to call us a tax haven. But we are not a tax haven. We are fully compliant with OECD rules and with European regulation, for instance. We have some of the strongest AML legislations in the world, and we have a solid Know-your-



FINANCE INTERVIEW Ernst Wilhelm Contzen

customer procedure. If you want to open an account here in Luxembourg, you are thoroughly screened. This reality is still too often ignored outside of Luxembourg. A coherent promotion strategy will help to dissipate this skewed image. People who consider Luxembourg for business might not always be aware of these procedures. We comply with the rules and we are responding to demands from tax authorities. Having said that, I’m against the automatic exchange of information. First of all, I believe that it is a form of personal discrimination. If, as a German resident, I open an account in Germany, no information is directly transferred to the German tax authorities. Why should I then be treated differently when I open an account in Luxembourg, where I clearly remain within the EU borders? Everybody has a right to privacy. The money that comes to Luxembourg is all “white” money. We don’t want “black” money here. In my election speech as Chairman of the ABBL, I said that we should have a zero tolerance for reputational risk. We cannot afford it, and we will not have it. For this reason, we need a strong regulator. But that’s not enough. Everyone needs to have a good look at their own company. At Deutsche Bank, I have a compliance department with two lawyers, one former auditor and an IT specialist. They analyse new products to see if they are in line and up-to-date with new directives as well as our own guidelines.


Naturally, it’s very difficult to change the perception of people. A lot of people associate Luxembourg with private banking. We are, of course, number one for private banking in the Eurozone. But we are also active in four other pillars of business: the international loan business, asset management, structured finance, and the insurance industry.



Until recently, we used to have a very old holding legislation, dating back to 1929. At present, we have about 15,000 holdings in Luxembourg, and this law had to evolve to make us compliant with today’s requirements. Wealth management relies

Ernst Wilhelm Contzen FINANCE INTERVIEW

on a solid and modern regulatory framework and flexible vehicles and structures. Seventy-five percent of HNWIs are entrepreneurs and face big risks while running their company. They want the necessary advice and support to proficiently manage their business. In Luxembourg, we have a skilled workforce. We are a very multicultural nation. A lot of people here speak four languages. At Deutsche Bank, we employ 18 nationalities speaking a great deal of different languages. As I said before, money is a commodity, but a very sensitive one. If we can talk to our customers in their mother language, they appreciate it. Luxembourg is a service country; we should never forget that.

by keeping our members informed on the latest developments. Michel Barnier, European Commissioner for Internal Market and Services, recently said that he has 18 different dossiers on financial regulations on his desk. Politicians have their minds set on taxing banks: there are proposals for a Financial Transaction Tax (FTT), a Financial Activities Tax (FAT), etc. Another regulation that takes up a lot of our attention is FATCA, the Foreign Account Tax Compliance Act. In short, we as financial intermediaries will need to make sure that American citizens are paying their taxes. The organisational changes and IT infrastructure that we need to implement

I would personally prefer for it to be a specific cluster group within the ABBL. A successful association costs money; you need permanent staff to run it efficiently. Creating too many new bodies could be counter-productive. We have LFF, which is responsible for the overall marketing and promotion of the country abroad. The ALFI and the ABBL also have a very good name abroad, and the ABBL is doing a lot of communication work at a local level. The ABBL, in contrast to most other associations, which deal with one specific type of product or service, is responsible for all things pertaining to the financial industry. We need to represent

“If you want to open an account here in Luxembourg, you are thoroughly screened. This reality is still too often ignored outside of Luxembourg.” What is your vision of training? If we want to remain a financial centre with high standards, we have to think about what kind of training and education we want to offer. This process has to start with the boss himself or herself. I myself go to universities; I went to Harvard in the U.S. and the International Institute for Management Development in Lausanne. At Deutsche Bank, every employee has to do training once a year. In order to remain relevant and innovative as a financial centre, training has to be life-long. How do you prepare the ABBL’s members to the upcoming wave of regulations? Through hard work: by remaining in constant contact with the public authorities and the supervisory bodies. By lobbying for rules that are as rational as possible and that take into account the day-to-day realities of the regulated professions. And finally,

in order to do this mean that we bear all the costs so that the U.S. can collect taxes; the total costs worldwide are expected to reach into the billions of euros. This is not just a problem for Luxembourg; it is a problem of the whole world vis-à-vis the USA. We need to bring the discussions about FATCA to the government level instead of dealing with each company on a case-by-case basis. In terms of regulation I’m afraid that it’s going to be too much, too soon. The financial crisis can only be partly blamed on banks; the regulators and customers looking for quick returns on their investments were also responsible. And the politicians were at fault too. What do you think of new associations created in Luxembourg to promote specific financial specialties? It’s always good to create associations to better represent certain activities, but

the financial centre in its entire diversity. On top of that, we are an employers’ organisation and, in this capacity, an official interlocutor of the government and other public authorities. People are asking me: “Do you have synergies now that you are moving together into the House of Finance with the ALFI and the ACA?” Yes, we do, in various business lines. During the ABBL’s General Assembly in April 2011, you mentioned that poverty can still be felt in Luxembourg. What did you mean? Luxembourg has gotten used to very high standards of living and high wages to finance these standards of living. We are caught in an upwards spiral. People who come to Luxembourg to work usually earn high salaries, certainly above the average found in other EU countries. Despite this, many people cannot afford to buy an



FINANCE INTERVIEW Ernst Wilhelm Contzen

apartment or a house because real estate is very expensive. Even for a couple earning two decent salaries it can be hard to buy a home when a simple row house costs more than EUR 600,000. In Germany and France, it’s half this price. The government has led an entirely counter-productive housing policy. And this has an impact on the future of the country. We also face a serious hidden debt as a country. If you look at the demographic evolution of Luxembourg today, you will see that in order to afford the same level of pensions in 2050, only 39 years from now, employment will need to rise by 3.4 percent a year. This means that by 2050 we will need to have more than 1.3 million people working in Luxembourg! But how do we create these jobs? And what about the infrastructure? That’s the big question. In Luxembourg, people can still retire at 57 today. People should know, and the government should tell them, that we need to extend the retirement ceiling from 57 to 62, or even 67. Everyone knows it, but nobody dares to talk about it. The



government says that we have a surplus in terms social security revenues today. Yet what is a surplus today is a deficit for the future. You have to keep on delivering services, and we cannot put this burden on later generations. We need to cut costs now. But in Luxembourg, cost-cutting seems to be a foreign word. We have to take care of the healthcare reform, the pension reform and housing policy. Even Jean-Claude Juncker said that if we want to have a population of 700,000 people, we also need to provide them with housing. At the same time, if we want to attract wealthy clients and encourage residence in Luxembourg, they also need to find what they want. The offer is not diverse enough today. This is why we have to think about our future and invent new products, attract new people to Luxembourg. Gone is the time of “plain vanilla” business and basic products. We can only survive by offering sophisticated services. We have to serve the big family offices here, wealthy families. We have the right

framework to do that. But there is still a lot of work to do. This would provide income not only for banks, but also for the lawyers, the auditors, etc. But we need enough skilled people to serve their needs. We also need a new legislation to set up foundations here. The current legislation is too old and ill-adapted. Luxembourg has to switch into a higher gear: other financial centres are not sleeping. People like to come to Luxembourg because we have a great deal of advantages, and we are in the middle of Europe. But we need new infrastructures, a well-connected international airport as well as good train connections. At night we are 90,000, but during the day we have 240,000 people here in Luxembourg City. We should avoid what people have to suffer through in London, where an average commute to the city centre may take up to three hours. At Kirchberg we already have frequent bottlenecks on the roads. A modern country, a service country, must make considerable investments in infrastructure.

Ernst Wilhelm Contzen FINANCE INTERVIEW

Moving on to another debate; what is the ABBL’s position on gender quota?

How are you planning for financial stability at your own level?

This is currently a big debate in Luxembourg. We need to do everything we can to bring women into top positions. But personally, I’m absolutely against gender quotas because it’s an artifical and unfair system that discriminates against other qualified applicants. Shareholders have the right to decide whom they want on their board. Even a family-owned company will have other criteria to bring people on their board besides gender. They want people whom they trust on their board, regardless of gender, because in the end they have to bear the risk.

Personally, I see the financial stability issue in the framework of Basel III and the Capital Requirements Directive (CRD). With Basel III, banks will need more capital, which is the right way to deal with this. We need to do it properly.


There will also be new rules for liquidity. A difference should be made between the institutions for which these rules apply. Global companies cannot always have liquidity in Luxembourg, Frankfurt, New York and everywhere they have a branch or a legal entity. In Luxembourg, we are currently in

talks with the BCL and the CSSF in order to find a rational and workable solution. A potential response would be to get a waiver for applying the proposed liquidity coverage ration at consolidated level only. We should have waivers for exempting some Luxembourg subsidiaries from liquidity requirements at such a low level. I’m for regulation, absolutely, but an intelligent regulation that takes into account the specificities of markets and business models. A one-size-fits-all regulation is not necessarily the best regulation.

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global > Opexia PFS - For successful financial engineering p18 > Kurt Salmon Luxembourg S.A. - First thoughts on IFRS 9 p20 > Luxembourg Financial Forum - Lessons for a European dream p22 > EFG Bank Luxembourg S.A - Cinq questions à... p24 > Carmignac Gestion - The U.S. join the race p26 > Global News p28



Global Financial engineering

Financial engineering, a key success factor in Luxembourg Developing “Asset structuring” capabilities for private clients is becoming a key success factor for private banking actors. Such capabilities are essential in a new strategy aiming at providing more value to more demanding clients. The Luxembourg financial centre offers interesting products to achieve such objectives. In comparison with Switzerland’s financial center, this country has real complementarities.

Opexia PFS To assist independent financial advisors and medium private bankers in implementing such transformation strategies while still reducing costs, Opexia PFS allows them to provide

This article will not be providing a comprehensive analysis of all products, but rather a brief overview of the key aspects. Over and above, it aims at highlighting the Luxembourg financial centre’s advantages, its private banking products and the possibility to build a new corporate strategy for independent financial advisors. This can offer new added value by combining reduced operational costs with multi-country tax reporting, thus improving service quality with tax and financial engineering.

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a high-quality service for financial engineering and business process outsourcing (multi tax reporting, back office processes outsourcing). Opexia PFS’s offerings can help smaller players in implementing such services and an efficient operational model which allow them to focus on the client relationship. With this new operational model, Luxembourg players remain competitive with other financial centres.



The private banking industry is experiencing a period of significant change. Many regulatory factors and underlying trends related to customers’ behaviour are changing the market structure. These changes require organisations to review their service model and their strategic positioning on the private banking market. They require urgent transformation of their organisation on the basis of three dimensions: market / business model / operating model.

Change now is imperative The implications of these changes on the business architecture of organisations are diverse and involve different components of the business architecture. The first implication is the need for private banking actors to achieve a significant reduction in cost structure over the long term. The underlying challenge is thus to manage the “scissor effect” induced by the new paradigm - changing the cost structure while investing in a business model adapted to the new market structure and client expectations. There has to be a transformation that takes into account the three components of the private banking business architecture: a new strategic position, a new service model, and a new operating model.

More value added Changes in market structure push for a re-evaluation of the elements in the value chain on which private banking actors are

positioned. The major changes in the European fiscal framework have accelerated the transformation of the offshoring-based business model. Providing value-added services is a priority for banking groups. A survey made by our research centre(1) to evaluate private banking managers’ preparedness for business model transformation shows an interesting typology, which is summarised in the matrix (previous page). It requires mastering different key success factors for the organisations. The service model and service coverage depend on the strategic choice of the market position. One strategic choice would be to position financial engineering capabilities as a key success factor for Private banking.

Tax optimisation strategy The Luxembourg financial centre is offering interesting products for the set-up of a tax optimisation strategy. Compared to other financial centres, more specifically Switzerland, Luxembourg’s legal framework has evolved within the context of the European integration in order to provide interesting vehicles to structure assets that allow an efficient optimisation and transmission strategy. Contrarily to Switzerland, Luxembourg does not provide the context for people to adopt a fiscal delocalisation strategy. This is the reason why Luxembourg can benefit from providing a diversity of financial vehicles. It is also fully eligible to the benefits offered by double Tax treaties and EC directives. Such vehicles for structuring private wealth include SOPARFI, Life Insurance, SIF, UCIs, SICAR, Securitisation vehicles, and SPF. They can structure different types of securities including Hedge funds, real estate, private equity, and debt portfolios. Each vehicle has its specific advantages which can provide solutions tailored to customers’ needs. Surveys(1)(2) clearly show that customers expect more in terms of tax advisory, tax reporting, and tax optimisation. Luxembourg is ahead of Switzerland regarding private clients residing in European countries. Complementarity exists between the two centres. For example, in the case of the structuration of expatriates’ assets having made the choice of delocalisation to Switzerland, our distant neighbour still continue to benefit from attracting non-European clients. Luxembourg actors need to continue to invest in order to provide best-class services in financial engineering. Big players wisely started some years ago to invest in human resources and processes that can support this transformation.


By Emmanuel Lebeau

References (1) NGR Consulting Survey : «New Business Model for Private Banks» (2) NGR Consulting Survey : «New Services creating value for Private Banking clients»

Emmanuel Lebeau, Managing Director of Opexia PFS



Industries Accounting

First thoughts on IFRS 9 IAS 39, which applies to financial instruments, celebrated its tenth anniversary in January 2011. Despite numerous amendments and revisions, IAS 39 will not have withstood the biggest financial crisis since 1929. Whereas at its creation, IAS 39 gave much importance to fair value the only valuation able to give an accurate picture of a company’s financial situation and net worth - now the fair value is partly the cause of its last modification: IFRS 9.

Fabrizio Dicembre

Senior Manager CFO Services at Kurt Salmon Luxembourg S.A.


The 2008 financial turmoil had already strongly questioned the fair value principle on both sides of the Atlantic. The subprime crisis had indeed urged the U.S. regulators to react: since then, the FASAB (Federal Accounting Standards Advisory Board) authorises in certain circumstances reclassification of portfolios measured at fair value to portfolios measured at amortised cost. This change had caused the European watchdog, the IASB (International Accounting Standards Board), to also take a stance. Under pressure by banks and governments fearing a real distortion in competition between U.S. and European financial institutions, the IASB had to adopt a similar amendment authorising, from 1 July, 2008, the reclassification of securities out of the trading category (measured at fair value) to the loan category (cost basis). European banks massively used this amendment in 2008: Dexia group reclassified nearly EUR 100 billion; Commerzbank, EUR 90 billion, etc. The same


amendment was also used during various sovereign debts crises over the past two years.

The birth of IFRS 9 The IASB, who has been working for a long time on IFRS 9, issued on 28 October 2010 the “second” definitive version of this new Standard, which completes the first version issued on 12 November 2009. This standard finalises the first of three phases planned by the IASB by focusing exclusively on classification and measurement of financial assets and liabilities. Other developments are still ongoing and cover: • Financial instruments: depreciation for which the IASB published in January 2011, a supplementary document called “Financial Instruments: Impairment” published in January 2011 by the IASB; • Hedge accounting: a draft of the project has been published in December 2010.

Those two phases are still going under discussion, although their comment period was closed respectively on April 1st for the former and March 9th for the latter.

A big leap forward Given the work already published, we can already appreciate the following achievements: 1. Regulator’s strong willingness to simplify existing rules: thinking about the result of the first phase, especially about the classification of assets measured at amortised cost or at fair value according to their business model and contractual cash flow characteristics of the financial asset, thereby getting rid of the four existing categories and their specificities (recognition and measurement rules, hedge opportunities, “Tainting rule”, etc.). 2. The clearly stated objective to make Hedge accounting a dedicated tool to present the effects of “an entity’s risk management activities”,

Accounting Industries

3. The disclosure of expected losses instead of incurred losses, as numerous observers criticised late losses recognition, having therefore a significant impact at the inception of the subprime crisis.

Some question marks remain Some doubts remain on other matters addressed by IFRS 9. We wonder why the fair value option for financial liabilities has been kept -therefore cautioning the rule “the loser wins”- even if the regulator offers this time to split the risk component of the own credit which has to be recorded in equity (OCI - Other Comprehensive Income) and the other components to be recorded in income statement. We further question the limitation of risks hedging opportunities that could affect the income statement, thereby causing an excessive volatility of companies’ equity, which contradicts the objective to reflect the company’s risk management

policy. Furthermore considering that the credit risk is not a component eligible for hedging - IASB claiming difficulties in identifying and measuring this component - as of now, this limitation appears to be in total contradiction with what the IASB currently asks companies when measuring their own liability at fair value (cf. above). Finally, we should keep in mind the operational obstacles existing when transitioning from an incurred loss model to an expected loss model. In addition to those elements, we would have appreciated a bigger convergence between international accounting norms on the hand, and prudential and regulatory norms on the other, in particular with hedge recognition and expected loss model. Moreover, the transition to IFRS 9 as it stands today will have no effect on the constitutive elements of the prudential portfolio negotiation, which will remain subjected to the EU directive 2006/49/CE.

IFRS 9 will apply to accounting statements from 1 January 2013. We should note that the application will only occur for European companies after the adoption of the text by the European Commission on the EFRAG’s advice (European Financial Reporting Advisory Group). We can already bet that the ongoing discussions could still substantially change IFRS 9. However taking into account the significant impacts on operations and systems, this date seems very close: preparatory work should be undertaken swiftly. By Benoît Becker, Senior Manager CFO Services at Kurt Salmon Luxembourg S.A., and Fabrizio Dicembre



Global finance


Photo : Delphine Reuter

Lessons for a European dream

Jeremy Rifkin, American economist, scholar, writer, and founder and president of the Foundation on Economic Trends

“I grew up on the American dream. It’s in my blood”, Jeremy Rifkin stated as an introduction. But the dream is over: the U.S. are 32nd out of the 34 OECD countries in terms of income disparity. Instead of climbing up the income ladder, immigrants to the U.S. earn the same income for years. The American dream has become a distant reality for many of them. In Europe, he said, has the dream changed? As racism is rising and income is falling for many, “what has happened to the European dream?” According to Rifkin, "the financial sector needs to wake up to new challenges if it wants to be ready for the century ahead. The financial crisis we now know was only an aftershock of the 2008 oil crisis. Too much attention has been paid to the consequences instead of to the cause itself.” Rifkin said that our civilisation depends so much on petrochemicals that it is hard for everyone to agree on other solutions. “Our entire civilisation is carbon-based. And when the prices of oil go up, the whole economy shuts down.” The discovery and the exploitation of oil fields, like in the Arctic, will cost trillions of dollars. With the world population growing and countries’ purchasing power going down, the balance of power is already shifting to what we wrongly call “emerging economies”. Rifkin said that the climate change and the ensuing water crisis already happening in some parts of the world is a clear signal for the



You can’t let a chance go by to listen to Jeremy Rifkin. The though-provoking American economist and scholar gave what felt like a lecture at the Luxembourg Financial Forum organised by LuxembourgforFinance on 26 May 2011. Addressing both economic and mentality challenges, Rifkin’s speech was inspiring in times where the financial sector is looking for a promising future. financial sector to “grasp the enormity of the situation”. “We are still running into the wall. We are looking at the quarterly statement, when we need to look at the human statement. We need a vision that can move us into the next century. We need to know where to invest.”

The cross-silo investments strategy The key for Rikfin is to evolve from a silo investment vision to a cross-sectorial investment strategy. “People can pay back the investments in their home appliances through energy savings. Homeowners are going to change the way the financial industry works.” The economist is not only working his scheme from his university chair and writing books about his findings; he regularly goes and meets with who wants his lights. Among others, he advised the Commission on its 2020 strategy. And cross-silo investments were part of the advice. “People say you cannot run the world on energy generated from garbage and sun. We did not have the answer for the last 30 years. But we had it for the last ten.” Rifkin is all for new energy production models converging with internationalised, multi-platform communication models. Being a strong believer in the concept of grid IT, he explained how similar new forms of energy distributions can be to the internet

model. Just as file-sharing signaled the end of the music industry and blogs threaten newspapers’ very foundations, the sharing of energy production and distribution is looking for inventive, winning new business models. “With grid IT and energy, power is given to the people. This gives it a much bigger multiplying factor. It’s a new evolution of consciousness.” Different energy sources plugging into the grid can sustain its functioning together. This would give rise to an “energy internet” to which all appliances would be connected and “if the energy supply is low, we can ask 2 million washing machines to forget the rinsing cycle”. The infrastructure (buildings, storage components, transportation systems, etc.) would be in need of new financial models. Could people consider garbage and sun as part of the solution to the energy crisis? “I’ve got guarded hope about this communication revolution. I don’t know if we can get there on time.” Until then, he called on the financial industry to “step in to support infrastructure”. “These are new opportunities for business. The old model where you produce and then you sell, does not work anymore. It is the people that will produce, and then you will sell. But to find solutions and ideas, you need to ask yourself: where do I want to be in 20 years’ time?” By Delphine Reuter

Industries Private Banking

Cinq questions à... Laurent Breulet, Vice President et François-Régis Montazel, Managing Director chez EFG Bank Luxembourg S.A. Suite à l'impulsion donnée par sa clientèle, EFG Bank Luxembourg S.A. s'est lancée dans une stratégie de diversification pour répondre aux attentes nouvelles en termes de structuration de ses investissements. Les SIF & SICAR, de par leur concept et du fait d'être des produits "onshore" et régulés, rentraient pleinement dans cet objectif en attachant une importance toute particulière au Private Equity. Pourquoi une pure banque privée décide-t-elle de s'engager sur la voie des SIF/SICAR ?

En matière de fonds SIF & SICAR, quels sont les domaines d'investissements privilégiés de votre clientèle actuelle ?

A l'aube des nouvelles directives européennes, comment considérezvous votre avenir sur la Place ?

FRM : Cette activité nous a parue naturelle de par notre qualité de banque privée. Face aux changements du marché et face à l'apparition de nouveaux produits, nous avons redéfini notre offre dans le domaine des Fonds Private Equity en l'adaptant aux besoins propres de chaque client. C'est une relation plus étroite et de confiance qui nous a convaincus d'être les interlocuteurs privilégiés de nos clients au détriment d'autres intermédiaires.

FRM : Du fait que ces fonds soient réservés uniquement à des investisseurs éligibles, prêts à prendre certains risques toujours bien définis dans le prospectus, les investissements réalisés dont nous avons la charge sont très diversifiés : l'Art, le Real Estate, les énergies renouvelables ou tout simplement des investissements en valeurs mobilières plus classiques.

FRM : Nous sommes déjà bien au fait de ces réformes. Par ailleurs, nous les encourageons dans un but de protection des avoirs de nos clients et nous nous y adaptons avec rigueur et sérénité. La banque a récemment mis en place une équipe dédiée et spécialisée bénéficiant d'une infrastructure importante, tant en termes de RH que de développement IT. Au niveau des actifs sous notre supervision, nous estimons pouvoir doubler voire tripler nos actifs sous gestion d'ici la fin de l'année 2011.

Quels sont les services que vous proposez sur ces nouveaux produits ?

LB : En tant que Dépositaire, notre fonction principale demeure la supervision des avoirs de nos fonds et donc de s'assurer qu'ils soient bien les propriétaires légaux des investissements réalisés- en poussant nos vérifications, si besoin, au-delà des véhicules intermédiaires détenus par ces fonds. Nous intervenons toujours en aval de la plupart des transactions effectuées par les fonds. Par conséquent, les avoirs sont scrupuleusement contrôlés et la “due diligence“ strictement appliquée. Lorsque l'importance de certains investissements le requiert, nos équipes se rendent sur place, à Luxembourg ou à l'étranger, afin de vérifier la matérialité de l'investissement.

LB : Nous offrons les services de banque dépositaire, d'agent de transfert, d'agent payeur et de cotation. Nous pouvons également intervenir sur une offre “All In“ en associant des intermédiaires de qualité sur la fonction d'Administration Centrale. Notre approche sur mesure allie le suivi du client, l'assistance et la mise en contact avec des interlocuteurs dont la réputation n'est plus à faire. En résumé, nous offrons la même qualité de service à nos clients privés en direct ou via un fonds d'investissement.



Qu'en est-il des risques associés ?


François-Régis Montazel (gauche), Managing Director et Laurent Breulet (droite), Vice President chez EFG Bank Luxembourg S.A.



Global Markets analysis

The U.S. join the race Nearly two years after Europeans, the U.S. have joined the race to stop their ballooning twin deficits. Europeans should logically be ahead of the game. But are they really? So far no real mutualisation of the peripheral debt has been accomplished. In this context, are emerging markets the only winners as they set themselves apart from the rest of the world’s economic woes? The U.S. have finally made the agenda! But it is not the bankruptcy threatening the U.S. government as it nears the crucial 2 August debtceiling payment deadline that pushed the public debt -equaling 98 percent of GDP- into the spotlight. At his inaugural press conference last April, the Chairman of the Federal Reserve Ben Bernanke stated point blank that the American deficit was ‘not sustainable’. Since then, the deficit has been rivaling in news popularity the headlines of even the most reeling restructuring stories of the European peripheral debt.

Didier Saint-Georges

Member of the Investment Committee of Carmignac Gestion


Of course, the financial press was not alone at the time to notice the sudden ‘urgency’. This also jogged the credit rating agencies’ memories that things were not getting better, and that the QE2 (Quantitative Easing 2) and the latest fiscal handouts were indeed delaying any immediate remedy. In fact, shortly thereafter, the credit rating agency Standard & Poor’s lowered the U.S. AAA credit score from stable to negative. On 2 June, Moody’s launched an ultimatum that if the American Congress and


the Obama administration did not make any progress on raising the USD 14.3 billion borrowing limit, it would review its U.S. rating. Serious consequences would clearly ensue from a negative review. And what appetite would emerging market countries have for a U.S. debt which is no longer AAA, as currency of choice to diversify their reserves? The impact on markets has been astonishingly muted. The U.S. bond market has been rather complacent with regards to the outstanding national debt problem, being more concerned about slower growth. The 10-year Treasury bond has rallied to dip under 3 percent yield. We anticipate that the main influence on the bond market will remain for some time the general state of the U.S. economy, which should continue to be favourable to bonds, and at least sentiment-wise initially, favourable to the American dollar when the debt-ceiling issue is resolved. While low interest rates should be positive for stock markets, earnings growth

has been exceptional. U.S. companies have benefited over the last two years from the recovery with low debt and default rates. Going ahead, we feel that there will be little chance for another earnings surprise on the upside. Current P/E estimates for 2011 are 13.21 and 11.66 for 2012. Historically these levels are still moderate, down from the heady levels nearing 18 at the end of 2009, after a strong U.S. recovery, and up from around 10.1 in August 2008 at the height of the financial crisis and ensuing recession.

No need for excessive optimism However, this does not reflect the whole story. On average, a 13 percent profit growth is forecast for this year and next year. The historical average is between 6 percent and 7 percent. The market is expecting double the historical average for two years running, which seems excessive to us. In this context, we anticipate -and have done so for a few months- a correction in the U.S. stock market, along with some disappointment

Markets analysis Global

with regards to the U.S. economy recovery.

In Europe, back to two speeds

We have already identified that some important leading indicators are pointing towards a slowdown in the U.S. economy (consumer confidence, manufacturing activity, and business confidence) in the second half of 2011 and in 2012. In the face of still poor unemployment figures and a morose building and real estate sector, a zero interest rate policy will certainly be maintained for some time. This is particularly true as the end of the QE2 will have some negative impact on liquidity. Who will be the buyers of the 80 billion debt issuances if the Fed is no longer there to repurchase? How will the economy be sustained when the government budget is just about to have a razor cut? Any reduction to government net spending, which currently makes up 24 percent of the U.S. GDP, would have a negative impact on growth. This would lead to the proverbial ‘double whammy’: both the government and the private sector stymied.

Where to head from here? Europeans have actually been trying to solve their respective debt problems for some time. From severe austerity plans in each country, to highlevel European caucuses, Europe has succeeded in reintroducing its very distinct two-speed economy. Greece’s austerity plan will plunge its inhabitants into yet another minus 3 percent negative growth while Germany is experiencing almost full employment. Greece has little capacity to pay down its debt at financing rates close to 20 percent and is indeed insolvent. The problem needs to be mutualised with the other European countries and especially with Germany, whose 40 percent of exports are destined for other European countries. They have every interest in participating to keep the European activity and the financial system afloat. When European finance ministers met on June 24 in Luxembourg, a decision needed to be made within the ESM (European Stability

Mechanism) on how to support the bailout fund after 2013. Within the ESFS (European Stability Facility), a decision had to be made on how to boost the current bailout fund. The burdensharing between core AAArated Europe and lower-rated peripheral Europe is unclear, as is the financial weight the private sector creditors will have to share in any event of debt restructure.

maturities. It seems like the only safe place is where we can identify positive fundamentals reflected in the solid balance sheets of public accounts such as in the emerging market economies. They actually have been suffering the consequences of their own success - a touch of overheating. By Didier Saint-Georges

Fortunately, some European companies have been able to climb out of the Old Continent’s quagmire of ills by developing new brand images and showing a great level of innovation. Others have franchised their revenues to the emerging markets instead of their most immediate trading partners. We continue to view with trepidation European investments and the European Union’s general health. Restructuring is a ‘time bomb’ - an inevitable event that only awaits the clarification of the core European governments’ roles, and the implications of their banking systems in future write-downs or prolongations of debt



Global NEWS



Claude Kremer’s new challenge at EFAMA

Claude Kremer, President of EFAMA

Claude Kremer, founding partner and Head of Investment Management at the Luxembourg law firm Arendt & Medernach and former ALFI Chairman, has been elected the new President of EFAMA, the European Fund and Asset Management Association. Mr Kremer has already served the EFAMA as its Vice-President. The presidency term lasts for two years. The election took place during the EFAMA’s General Assembly meeting. EFAMA members also elected two Vice-Presidents to replace Mr Kremer: Mr Christian Dargnat, Chief Executive Officer of BNP Paribas Asset Management (BNPP AM) and Mr Massimo Tosato, Executive Vice Chairman of Schroders plc. A new Board of Directors has also been elected during the General Assembly. New members have been added to the association, among which 15 corporate members and 18 associate members. EFAMA now counts 56 corporate members and 27 national member associations.

Who are the UHNWIs? Société Générale Private Banking and Forbes Insights have analysed the trends and characteristics of the world's wealthiest population, the Ultra High Net Worth Individuals (UHNWIs). According to the study "Driving Global Wealth, Mapping ultra high net worth individuals around the globe“, the balance of global wealth has begun to shift from traditional Western economies to



the emerging markets. The unprecedented growth of the Chinese economy, the expansion of India and the ongoing progress of markets in Russia, Brazil and other countries, have led to this fundamental change in the nature of the world's richest individuals and families. The U.S. still have the greatest number of UHNWIs, but there are now more billionaires in China, Russia and India than in Western Europe. The survey was carried out with figures and data from Forbes Media's database used for compiling the Forbes Magazine billionaire lists. Read the survey at http ://

ALFI: FATCA could affect fund distribution

Association of Luxembourg Funds Industry. “Our aim is not to stop FATCA - in any case, the law has been voted in - but to find ways to accommodate the law, to help the U.S. achieve their goal of catching tax evaders, while at the same time finding ways to lighten the administrative burden that is put on us, and the subsequent cost burden that will be put on investors.” FATCA is due to be implemented on 1 January 2013.

Luxembourg first for stability Luxembourg is the most stable fund domicile in the world, followed by Malta and Guernsey, according to the 2011 stability index by The index rankings are based on a combination of macroeconomic and fiscal data, as well as fund flow statistics. The index report says that Luxembourg’s economy again had a relatively strong year in 2010 and its fund flow data for the year was ‘impressive’.

Finding new ground for equity markets

Charles Muller, Deputy Director General of ALFI

The Foreign Account Tax Compliance Act, or FATCA, was enacted in March 2010 by the U.S. government to combat tax evasion by U.S. taxpayers. The ALFI, the Association of the Luxembourg Fund Industry, believes that FATCA will be a huge project to undertake, both for fund managers outside the U.S. and for the U.S. officials themselves. “Implementation will be a long and costly process and it will be the European investor who pays the price as U.S. investors are very rarely invested in European funds”, said Charles Muller, Deputy Director General of ALFI, the

According to Dexia AM, equity markets still present attractive value going forward. “It is not impossible that we are seeing a replay of 2008, namely a cocktail of higher inflation, an economic slowdown and rising commodity prices, wrote Frédéric Buzaré, Global Head of Fundamental Equity Management at Dexia. But so far the central case remains that we find ourselves in the midst of a mid-cycle slowdown, which results in temporarily slower growth, without a break of the longer-term uptrend. Therefore, equities remain very attractive going forward. Real risk-free yields are negative, corporate profitability is very high, balance sheets are flush with cash and risk premiums have risen again of late. We believe that the return on equities will come primarily from a contraction of elevated risk premium. Trading at 10 to 11 times forward earnings,

NEWS global

member of the Bank of International Settlements located in Basel, Switzerland. The BCL was selected along with the central banks of Colombia, Peru and the U.A.E. Founded in 1930, the BIS is the world's oldest international financial institution. The Bank for International Settlements promotes the cooperation between cenFrédéric Buzaré, Global Head of Fundamental Equity Management at Dexia

European equity have already discounted a form of soft patch. In a certain sense, it is hard to find compelling alternatives for equity investments right now.”

Callataÿ & Wouters double profits Yves Mersch, Governor of the BCL

tral banks and contributes to establishing international norms for the banking sector. Both developed and developing countries are among the BIS's members.

First full user on Clearstream’s XBS Clearstream has signed the first customer for its Cross Border Services (XBS) offering, biw Bank für Investments und Wertpapiere AG. The bank is now a market maker at Wiener Börse AG using Clearstream Banking Frankfurt as settlement agent. XBS, the first pan-European cross-border settlement solution in central bank money, was expanded from over-the-counter settlement to the settlement of trades from selected stock exchanges. Through XBS, Clearstream provides high volume standardised crossborder services for clearing, settlement and custody which enable straight through processing in a real-time environment for customers. XBS provides the benefits of TARGET2-Securities ahead of the T2S launch in September 2014.

KPMG survey tackles FATCA challenges Callataÿ & Wouters, creators of banking technology solution Thaler, announced a revenue increase of 6 percent for fiscal year 2010, bringing the actual turnover to EUR 72.5 m. This growth was driven by 12 new client deals among which Argenta Netherlands, ASR Bank, BPER, etc. Further business development is underway in the Philippines, Malaysia, Eastern Europe, and China. The company received the Leader status in the Gartner Magic Quadrant 2010 for international retail banking systems.

BCL to join the Bank for International Settlements On 26 June 2011, the Central Bank of Luxembourg (BCL) was invited to become

In June 2011, KPMG released a survey worldwide, "FATCA and the fund industry: Defining the path", aimed at helping financial intermediaries deal with the U.S.'s FATCA (Foreign Account Tax Compliance Act). For the purpose of this study, KPMG studied fund promoters in 12 countries. Results showed 10 percent of respondents having already conducted a FATCA impact analysis, and 13 percent having done no analysis on FATCA to date. The survey reflects the fund industry's widespread worry that the 1 January 2013 deadline may be too close and that the current systems and processes will be deeply affected by these changes. Both business models and operating models will need to be adapted. The survey is available at : http ://



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industries > Focus: The financial translators p32 > Islamic finance p40 > BrightPattern - Customer Service in Retail Banking p48 > Alter Domus - The stepping stone p50 > ERGO - The “Luxembourgisation” era P52 > BCL - On leverage in Luxembourg’s banks p55 > Local News p58



Industries Financial Translators


"Productivity is not our first goal" Translators rarely make headlines - but they are at the heart of Luxembourg’s communication and promotion strategies. They are to the financial sector what breathing is to oxygen-deprived blood: a precious yet not well-known industry, unavoidable when it comes to facilitating the exchange of information between companies and their customers, to clarifying quarterly reports for regulators, and even to providing readable promotional leaflets for investors to grasp in a few words the advantages of doing business in Luxembourg. With the KIIDs (Key Investor Information Documents) as a common challenge, discover Luxembourg’s word magicians: the financial translators.

Stating that finance is complex is a no-brainer. Concentrating for hours to write a crystal-clear translation, on the other hand, requires skills and patience. Financial translation is not everybody’s cup of tea. But if you are looking for the right translator, you should still make time to test the company you mean to hire for the job, according to the Managing Director of TALK finance, a financial translation specialist. "Many customers are not aware of what is hidden behind low-price offers for translation,” Martial Mernier said. More often than not, the cheaper the translation is, the more mistake-ridden the result. “We have tonnes of examples where we needed to write the customer’s leaflet from scratch, even if authorities had accepted the initial text, just because it had never been proofread by a native speaker. There is low price, and there is productivity, and you should be cautious with translators who promise both.” According to Martial Mernier, translation is the professional activity with the most striking price discrepancy: from EUR 0.04 to EUR 1 per word. His biggest challenge is therefore to educate customers to understand what services they are paying for. “At four cents per word, word-to-word translation is done by a machine”, he explains. “It brings no added value to the customer.” His best advice to clients is to test their service provider, “Not only once, but time and again”. For Mernier, the key to success is expertise. “If a language starts to become important, we consider hiring somebody to cover it. It optimises the quality of our work and we can train the person more easily inhouse. Training a translator requires time and effort, and even more so for a financial translator.” It takes three years usually be-



fore an inexperienced hire can stand on his own two feet. “You can translate finance by looking up words in a dictionary, but if you don’t understand the underlying mechanisms, it will not make sense,” he said.

Powered by memories TALK finance’s nearly 30 employees and its team of 100 freelancers translate about 2,500 funds passports per year, which directly feed their internal database of “translation memories”(1). These standard files contain the DNA of TALK finance’s clients’ communications, i.e. examples of translations previously used. Mernier and his team of translators refer to the database to improve text consistency and translate faster. Words and expressions are re-used whenever they fit the context better – a kind of “word recycling” - and the customer ends up paying less. “When you consider a financial translator, price is not the only issue,” Mernier warned. “If it’s less expensive upfront but there is no word recycling afterwards, in the end you might end up paying more for a product of lesser quality.” In the case of the KIID (Key Investor Information Document), a lot of the content is recycled from previous passports translations. If the company’s workload has increased by 40 percent this year, it is only

Financial Translators Industries

partly due to the KIID. The challenge lies elsewhere - managing deadlines. “Often, we can dedicate resources ahead of time. But, most of the time, work arrives without warning and we still need to satisfy customers. For us, each word counts.” By Delphine Reuter Translation memories are a word- or sentencecomparison database. The system proposes translations used in previous texts.


Martial Mernier, Managing Director of TALK finance



Industries Focus - Financial translators


Translation is not just translation From lifecycle management to security solutions, euroscript aims at guaranteeing financial actors like banks and fund managers an all-encompassing environment that they feel familiar with, as Arnaud Daix, Managing Director at euroscript sàrl, explained. The euroscript group, whose Luxembourg branch is spearheading its financial and public sectors businesses, has integrated translation offers within its document management services. ”Financial services require confidentiality, security and quality, Carine Collard, Service Manager in language services at euroscript, said. They need a reliable partner on the long term, who can follow them to manage changes linked to regulations. For example with the Key Investor Information Document (KIID), all translations are regarded as official documents, so there should not be any mistake.” In the funds sector, 40 percent to 50 percent of all euroscript’s business in Luxembourg is provided by KIIDs. “The simplified prospectus could be as up to 16 pages and have to be replaced by a very strict format of two pages, using plain language, Anne Lux, Sales Manager in charge of the B2B sector and language services, said. This is not a problem for us as all our translators have an extensive knowledge and expertise in finance. The documents which need to be translated are received by euroscript through a secured system (either an FTP or a portal), and communications are always encrypted. The text is then extracted or copied within euroscript’s system. It sometimes takes more time to prepare a document than to translate it. “For each translation project, we have to find the right system that can support it, Anne Lux added. We are coping with many formats, we have to adapt to different ways of working. Technology helps



us to adapt to these needs.” As soon as the translation is validated by the customer, who can access the document through the portal or the FTP, the text is safely stored by euroscript as a reference document for future translations.

ers are frequently required. “Usually in the regulation-driven financial sector, many demands from customers come at the same time, Carine Collard said. So pools are handy to cope with that growth. We cannot ask the customer to wait.”


Finding the right candidate can be a challenge. “Luxembourg is a relatively small market so we don’t really have many Greek translators with a financial background here, Geert Gysels said. Yet thanks to our group’s network we can recruit specialized financial translators with Greek in other locations. Sometimes, we may need to explore other channels, but this barely happens. This is one of the advantages of being part of a group with many resources.” The company’s quality insurance check for translations is twofold: first, the revision is done by a native speaker of the target language who ensures the right use of terminology and overall coherence. Second, the technical check is done by the team leader who goes over technical integrity and lay-out. Everyone is subject to a confidentiality agreement and access to documents is strictly controlled. “We have a PFS certification that allows us to do just that”, Geert Gysels commented.

Each customer has a dedicated translation memory as the language and the target market determine the terminology used. “The legal framework also being different, that needs to be rendered correctly in the targeted countries, said Geert Gysels, Service Manager in charge of translation teams. For example, Spain falls under the scope of EU directives, but not Argentina.” Two hundred translators work within the group, with the language expertise being split geographically. With the added help of freelancers, euroscript group reaches 4,000 to 5,000 translators worldwide. About 1,600 of them are specialised in the financial sector, with 1,000 (20-25% of euroscript’s total workforce) speaking European languages. The 600 others concentrate on emerging markets like China, Brazil, South America. The pools of translators are invaluable. At euroscript Luxembourg, between 14 and 20 people are focused solely on financial translation and/or revision and freelanc-

By Delphine Reuter





Arnaud Daix, Managing Director and Geert Gysels, Service Manager in charge of translation teams at euroscript s.à r.l.

Industries Focus - Financial translators


Sailing between creativity and consistency The European Commission often pledges for more transparency and regularly earmarks budgets to facilitate outward communication to European citizens. Since the last enlargements of 2004 and 2007, most documents need to be available in the 22 official languages in the EU. As Jurgita Tricyte, a Lithuanian working for the DG Translation at the European Commission, explained, consistency is the main objective - especially when sensitive documents could spark debates.

Jurgita Tricyte, Lithuanian translator at the Directorate General Translation – European Commission

Jurgita Tricyte is a trained linguist and economist. After having worked for seven years in a commercial bank in Lithuania, she joined the Commission in 2005. So far, she has concentrated on documents from the DG Budget and DG Competition. “Oftentimes, we have to translate highly specialised texts, she said. Budget documents, annual accounts of the EU, competition cases are rather complex and they require a good knowledge of the sector. Financial texts can be very technical. There is a lot of research you need to do, experts need to be consulted. Then, you need to find proper terms in your target language. Mine is Lithuanian. Sometimes I have to create terms if they don’t exist. We have language experts here who either approve our translations



or ask us to improve their consistency. The financial documents we translate need to be made public; we are creating what we call reference documents. Therefore the translation has to be right.” Just like translation companies, the DG Translation relies on IT tools like terminological pools and translation memories (1). “Every department pays attention to quality assurance. We refer to treaties so we ensure consistency and quality. Every year, we translate the EU’s budget. A lead translator coordinates all the issues related to that translation. All inconsistencies are signaled to him, and he can then pass the message to all language translators.” But she also translates press releases, guidelines for implementing

directives in each Member State, etc. “There is no such thing as a financial translator. The heads of units decide who gets what text, because they know our specialties. Each unit gets a specific DG for which they translate documents, so you get specialised little by little in that DG’s activities. We also coordinate efforts with translators from the Parliament and the Council, especially when a regulation needs to be reviewed by them. Some translators are also terminologists who meet with representatives from other institutions to coordinate terminology consistency.” (1) IATE is the main reference tool : http ://

by Delphine Reuter

Focus - Financial translators Industries


"Having studied translation does not automatically make one a sworn translator"

Recruitment difficult for new EU languages Alan Landa, an English-Czech translator working at the European Commission’s Directorate General Translation (DGT) based in Luxembourg, does not regret having joined the DGT’s ranks in 2006. Having become an expert in the translation of, among others, competition cases and reports of stability and convergence programmes, he enjoys translating financial documents which he finds

Polyxeni Kanelliadou is a sworn interpreter and translator at the Luxembourg Supreme Court. She explains how translators’ professionalism could be improved.

“concise and precise”. But, Alan Landa said, good translators have become a rare breed. It has become a real challenge to fill the positions offered within DGT, even if the salaries are often higher than what is usually seen

What is a sworn translator in Luxembourg? A sworn translator (in French: traducteur assermenté) provides certified translations when a legal validation is required for any kind of document, mainly birth certificates, marriage documents, divorce certificates and university degrees and other documents to be admitted in courts, for state authorities, for the government where he/ she operates or for private individuals. A sworn translation has, at the end of the document, a statement signed by the translator, attesting that the translator or translation company representative believes the target-language text to be an accurate and complete translation of the source-language text. If the translation is due to be used abroad, an official stamp (“apostille”) is required. This is a form of authentication issued for documents for use in countries that participate in the 1961 Hague Convention. In Luxembourg this procedure is undertaken at the Bureau des Passeports, Visas et Légalisations of the Ministry for Foreign Affairs. The efficiency of the translation certification process depends on the competence of the translator. Having studied translation does not automatically make

one a sworn translator. Each country establishes its own conditions for attributing this title and has its own certification programme. At this point, I would like to stress that a distinction should be made between “sworn translators” and “sworn interpreters”, terms often confused, since these are two different professions. However, in Luxembourg – but also in other countries – the official title is “sworn interpreter and translator” (in French: interprète-traducteur assermenté).

in Prague. “The problem nowadays is to find translators willing to leave the Czech Republic and come live in Luxembourg”, he explained. There is a strong demand for people with a specialisation in finance, engineering or some technical background, with relevant years of experience and who feel comfortable using another language beside their own. But the people who fit the profile can usually get a decent salary at home and are not willing to be uprooted. “The

Is this certification wellknown in Luxembourg?

difference in income between Prague and Luxembourg is not important enough to motivate them to relocate”,

Yes, it is. Embassies and consulate offices, in particular, often need this type of certification in order to complete administrative processes concerning, for example, a civil marriage or a birth declaration from the country of origin of the persons concerned. There is, however, no specific exam to become a sworn translator in Luxembourg. Candidates simply have to submit their request and the relevant supporting documents (CV, academic title, etc.) stating their languages, in order to be certified by the Minister of Justice, although the criteria for this certification are not made public. The swearing-in

added Mr Landa. According to him, more than one candidate interested in an EU career could find housing and living costs in Luxembourg prohibitive compared to those in Prague. Another obstacle in finding the right resources is the waiting time imposed on the candidates. There is oftentimes more than a year between the competition and the opening of a position. “The person can get married, have a child or start another career” in that time frame, he said.



Polyxeni Kanelliadou, Assistant Professor specialised in Traductology and Interpreting from Italian into Greek at the Department of Italian Language and Literature, Aristotle University of Thessaloniki, Greece - Sworn Interpreter and Translator at the Luxembourg Supreme Court

ceremony is performed by the Luxembourg Supreme Court (Cour SupĂŠrieure de Justice) once or twice per year. What could be improved for this process to be more efficient? As far as I am aware, in many countries there is a government-administered testing system to authorise a translator to mark documents with an official status. There are also countries where translators associations attribute a certification against payment (for example, the ATA - American Translators Association). I think that creating a Translation Depart-



ment in the University of Luxembourg would provide the country with a certain number of professionals in the field without obliging Luxembourg students to study abroad and that, at the same time, modifying the selection procedure in Luxembourg by the creation of a national board, composed of translators, to hold a very selective test when there is a need for a specific language pair, could bring a positive change and would render the certification procedure much more efficient than it is today. It could also be useful to ask all the translators on the national register to take an exam every five years in order to maintain their qualification. Furthermore,

the national register should specify whether a registered person is an interpreter or a translator or both and should contain the language combinations for every sworn translator (for example, EN-FR for English-French), as well as his or her specialised field(s). And for translators to be more aware of its usefulness? The Ministry of Justice should establish study requirements (university degree in translation/interpreting). In this way, the national register of sworn interpreters and translators would only include professionals


sworn translators at Luxembourg's Supreme Court


sworn translators specialised in Finance and Accounting

Y-1 : time to move on Spot-on Luxembourg : in June 2011, the Grand Duchy was the only European Member state which had fully transposed the UCITS IV directive into national law. By 1 July 2012, all simplified prospectuses should be phased out and replaced by Key Investor Information Documents (KIIDs). In June 2011, a year before the deadline, 14 KIIDs had already been published on Finesti’s website. But with 34,000 investment products listed by Finesti, it could represent anything between 34,000 and 204,000 KIIDs -depending on the number


official languages in the European Union

of translations for each documentthat should be made available in the summer of 2012. According to Locordia Communications, a translation services provider, even though Luxembourg companies enjoy

© Christo Polychronis Photography

a proactive legislative environment,


official languages in Luxembourg

Interview by Delphine Reuter

deadline. “From where we stand, it looks like companies are watching each other to see who will make the first move, said Philippe Mercier, CEO of Locordia Communications. Only a few banks have put in place


professional association of translators in Luxembourg in the field and not simply persons who may have a perfect knowledge of languages, as is currently the case. Furthermore, this would represent a guarantee for the state as Directive 2010/64/EU of the European Parliament and of the Council of 20 October 2010 on the right to interpretation and translation in criminal proceedings will require interpreting and translation services of a very high level. Member States are to bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by 27 October 2013.

they are at risk of not meeting the

what is needed to successfully create the KIIDs.” Philippe Mercier also said some things are at odds with the European Commission’s stated goal of terminology standardisation. Even if the KIID’s goals are to promote transparent information, some terminology is let to each Member State’s discretion, which could lead

34,000 the minimum number of KIIDs on Finesti's website by July 2012

204,000 the maximum number of KIIDs

to potential misunderstanding in the application of the directive. “The directive is the legal basis for what terminology Member states should use”, he said. More : ABBL’s advice on how to get prepared : http :// The European directive : http :// What the law says in Luxembourg : http :// Interview by Delphine Reuter



Industries Islamic finance

Jumping on the bandwagon of Islamic finance

Shariah governance onboard The conference showed that although investors are showing interest for the

The financial industry in Luxembourg and elsewhere is increasingly showing an interest for Shariah-compliant investment products. With the global financial and economic crisis having shaken the foundations of investors’ trust, Islamic finance, which is traditionally more cautious about where the money is invested and for what use, is becoming more and more attractive. Today, only 16 Sukûk with a combined value of USD 7.3 billion are listed at the Luxembourg Stock Exchange and 38 Shariah-compliant funds and sub funds are domiciled here(1). But the law firms’, fiduciaries’ and service providers’ growing interest for calling things Islamic could lead the way for a strong activity in the sector in Luxembourg.

sector, there remain questions about applying Shariah law-inspired rules to the structure of their investments. And what about non-Muslim employees having to work under such rules ?, they asked. How would the rules be enforced when working traditions are not Islamic ? According to Simon Archer, IFSB Consultant and Visiting Professor at the ICMA Centre at the University of Reading in the U.K., the IFSB guidelines detail standards on Shariah governance. The bank needs to set up internal compliance procedures like audits whose results are then being presented to a Shariah board. “None of this guarantees that the bank will be Shariah-compliant, Archer said. But it will warn the country supervisor, who needs to check that the bank has this kind of

"I get several phone calls every single week from people curious to know about Shariah law-compliant mortgage funds, Eleanor de Rosmorduc, Communications and Public Relations Officer at Luxembourg for Finance, said. Investors, HNWI and the mass wealthy are not particularly willing to invest money in the Middle East, so they are looking for a solution here.” Luxembourg could be a gateway for starting cross-border investments in Europe. “We already have the structure to distribute”, said Eleanor de Rosmorduc. London has shown the way so far for strong developments in the Islamic financial industry - other countries having not yet created what is needed to successfully attract Arab bankers and major Islamic funds.

of the secretariat at the Islamic Financial Services Board (IFSB), what counts today is gaining back customers’ trust, and Islamic finance could be one of the solutions. “It’s not just about the banks providing a climate of confidence to the end-customer, it’s about the whole system,” he said. The crisis, which revealed weaknesses in sophisticated financial products, sparked a need for products promoting transparency and equal share of profit and loss. In that sense, Sukûk could very well show the way forward. According to the Luxembourg law firm Theisen, “the general consensus amongst industry players is that global Sukûk issuances for 2011 will surpass the record high of USD 34.2 billion in 2007”(2).

Sukûk, the way forward?

But Luxembourg will only be successful in this sector if it can also provide the right services. Whereas it is true that the interest for Islamic finance started in the 1970's, and

system in store. There are always trivial cases of non-compliance.”



But customers also need to be convinced. According to Idjarmizuan Ibrahim, member

Islamic finance Industries

that the first Sukûk entered Luxembourg’s market as early as 2002, the financial sector still needs to take steps forward before it is considered a front-runner in the sector. Today, law firms are on the forefront of this evolution. Arendt & Medernach recently joined IsFin, a global network of lawyers specialised in Islamic finance, and Luxembourg-based firms are regularly confronted to customers abroad questioning them about opportunities for investing in Shariah-compliant funds domiciled here. On 10 May 2011, Islamic finance took the front stage in Luxembourg when the IFSB summit – Islamic Financial Services Board - took place at the Chamber of Commerce, gathering 80 Luxembourg-based participants out of about 250 visitors, according to the organisers. While it gave more visibility to the industry, whose development has insofar not been strong in Luxembourg compared to a financial centre like London, the question remains: Will Luxembourg jump on time on the bandwagon of Islamic finance? By Delphine Reuter

References : Theisen law firm (, "History of innovation in the European Islamic finance market”

(1), (2)

Eleanor de Rosmorduc, Communications and Public Relations Officer at LuxembourgforFinance



industries islamic finance


Legal perspectives Theisen Law and Arendt & Merdernach give their take on Islamic Finance's chances to succeed in Luxembourg.

Florence Stainier, Partner at Arendt & Medernach



Bishr Shiblaq, Head of Dubai Representative Office at Arendt & Medernach

Sufian Bataineh, Of Counsel at Theisen Law and Managing Director at Dananeer S.à r.l.

What are the legal advantages that Luxembourg offers to Islamic investment houses and funds as compared to other financial centres ?

Which Shariahcompliant financial products are most likely to be successful in Luxembourg and why ?

While other countries are still reviewing their domestic legislation in order to become more attractive for Islamic finance, Luxembourg has quietly established itself as the European hub of this growing sector. One of the advantages of Luxembourg is the wide range of investment vehicles and its leading position in the investment management industry. We can say that Luxembourg has fulfilled this role for Islamic funds as well. More than 70 percent of the Luxembourg Islamic funds have been set up as UCITS. A Shariah-compliant fund manager deciding to create a Luxembourg UCITS will have the opportunity to sell units or shares of this fund without additional formalities in the EU. More importantly, UCITS are not only recognised in Europe, but also in other regions. UCITS offer a recognised brand, normally dedicated to retail investors, while providing a high level of protection and regulation in terms of eligibility of asset classes, liquidity and risk management. From the perspective of an investment manager intending to set up an Islamic fund, UCITS are advantageous because they can attract a wide range of investors. Around 15 percent of Luxem-

Luxembourg will continue to play a major role as regards both Sukuk and Islamic investment funds. The Luxembourg Stock Exchange is an attractive gateway for listing Sukuk. First of all, Sukuk issues and issuers have always been subject to the same rules as the ones applicable to non-Islamic debt securities. Secondly, the conditions for Sukuk listing on the LuxSE’s markets are quite straightforward : Sukuk are admitted to trading on the Euro MTF market and could possibly be admitted to trading on the European regulated market if the issuer wishes so. More generally, Sukuk issuers can benefit from all the advantages that the Luxembourg capital market is offering, namely an attractive international listing market place for securities and the support of international clearing and settlement entities. As for Islamic investment funds, we have noted that they intensively migrated to Luxembourg in 2008. That year, 19 Islamic investment funds were set up in Luxembourg by global asset management companies. Following the crisis, the setting-up of new Islamic investment funds were affected in 2009 and 2010. However, new promoters whose activities focus on

islamic finance industries

bourg Islamic funds have been set up as SIFs, a fund type which benefits from great flexibility in terms of organisation, eligible assets and investments, and may be offered to sophisticated investors. Another popular vehicle is the SOPARFI, but there has also been interest in the Luxembourg securitisation vehicles. Both vehicles have in common to be highly flexible and to allow for tax-efficient structures. In addition, Luxembourg offers a wide network of double taxation treaties, and it is seeking to constant increase. Another advantage is that the Luxembourg government is a strong supporter of the country’s development as a centre for Islamic finance. A set of circulars has been issued by the authorities to clarify the treatment of certain instruments and vehicles. These circulars do not change the existing treatment, but provide guidance on their qualification or clarify that no additional requirements, other than those existing for conventional instruments, are necessary from a Luxembourg perspective. The legal framework in Luxembourg does not create any obstacles for Islamic funds and, as confirmed by the CSSF (the Luxembourg supervisory authority), there are no specific legal requirements concerning Shariah-compliant funds set up under Luxembourg law.

Shariah-compliant financial products have entered into the Luxembourg market. We expect that Luxembourg will attract more Islamic funds in 2011. Up to now, five Islamic investment funds have already been launched by BLME Asset Management and QIB (UK). The performance and returns of all Luxembourg Islamic funds have been consistent through the years, regardless of the geographical allocation of investments. This can probably be explained by the fact that the top performers are all equity funds, thereby we attribute their good performance and positive returns to the relatively favourable positive conditions in global equity markets. Also, none of the Islamic funds domiciled in Luxembourg invest exclusively locally. However, despite these recent developments, more efforts will have to be done in order to keep the same level of attractiveness for Shariahcompliant financial products. Recently, we have noted that London Stock Exchange is still attracting more and more Sukuk listing. In the recent years, the listing of Sukuk on the LuxSE has, on the contrary, remained stagnant.



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islamic finance industries

Islamic finance at a crossroads – how Luxembourg can help Luxembourg has been engaged for some time in Islamic finance and can claim to have been one of the first movers in this sector in Europe. Indeed, the track record is quite impressive and the history dates back to the 70's. In 1976 Luxembourg organised a seminar on the Islamic banking system; in 1983 the first Shariah-compliant insurance company in Europe was established in Luxembourg; in 2002, the Luxembourg Stock Exchange became the first stock exchange in Europe to list a Sukûk.

© photo : Ernst & Young

Pierre Weimerskirch

Partner at Ernst & Young Luxembourg

More recently Luxembourg geared up its efforts towards Islamic finance with the Luxembourg tax authorities issuing circulars clarifying the tax treatment of various Islamic financing arrangements. Moreover, the Luxembourg Central Bank is the first European central bank which became an associate member of the Islamic Financial Services Board (IFSB) and is a founding member of the international Islamic Liquidity Management Cooperation (IILM) launched last year. Furthermore, the Luxembourg government and respective trade associations have put a huge amount of effort into promoting Luxembourg and its financial center as a centre of excellence for Islamic finance. Today, Luxembourg is the leading Islamic investment

fund domicile in Europe. There are about 40 regulated Shariah-compliant investment funds domiciled in Luxembourg with assets totaling USD 500 million. The large majority of these funds are equity funds. More recently, funds investing in Sukûk or private equity have been launched as well. The fund initiators are foremost European banks and asset managers. Lately, fund initiators from the Middle East and Far East have also chosen Luxembourg as a fund domicile in order to leverage on the Luxembourg brand and experience regarding the distribution of funds on an international basis. Beside the regulated funds, it is estimated that approximately USD 2 billion of assets are held through unregulated Shariah-compliant investment structures. Most of these

assets are real estate related. Furthermore, Luxembourg is a major stock exchange for the listing of Sukûk, i.e. Islamic debt instruments comparable to bonds. The first Sukûk admitted to trading was the Malaysia Global Sukûk in 2002. As of June 2011, 16 Sukûk with a total amount of USD 7.3 billion are listed on the Luxembourg Stock Exchange. Over the years, Luxembourg has developed the capacity and gained the experience in dealing with Islamic financial products from a regulation, operations, clearing, payment, and settlement point of view.

Loss of momentum After years of strong growth, Islamic finance has lost its momentum. The number of funds as well as assets under management has remained



industries islamic finance

flat over the last three years. Projects for new funds are being discussed but, just a few are launched. The same situation can be observed for the listing of Sukûk. Indeed, no new Sukûk has been listed during the last 18 months on the Luxembourg Stock Exchange. Taking a look at the global picture, a similar trend can be observed. Globally, Islamic funds assets under management remain flat at USD 52 billion, a result comparable to 2008 figures. At the same time, the issues of new Sukûk declined by 50 percent to 2006 figures. It is only recently that a sharp resurgence in new Sukûk issuances has been observed. Of course, with the financial crisis, difficulties have been experienced across wider financial markets. But since the end of the financial crisis in late 2009 Islamic finance has only slowly grown and not bounced back to the strong pre-crisis growth rates of 15 percent to 20 percent per annum. Islamic finance is a nascent industry. As for every young company or industry it has to overcome some major challenges in order to progress from one growth stage to the next. Understanding and meeting these challenges is important in order to reach the next growth stage.

Into the next growth stage There are a number of challenges Islamic finance faces. First of all, there is no global Islamic finance market. Mostly local, the market is at best regional, while Islamic


fund management is also still a very local market. Not only is the Islamic fund industry very scattered but, 70 percent of the Islamic fund managers are below the threshold of USD 80 million assets under management, which is believed to be the required break-even point. In addition, the diverse Islamic finance frameworks and practices in various countries hamper the development of a global Islamic finance market. Another challenge is the varying interpretation of Shariah law, which is open to interpretation. Shariah boards can have different views on certain Shariah matters. In some instances, it may happen that opinions may deviate from previous decisions made by other Shariah scholars, something which happened recently for Sukûk issuances. A major catalyst for global acceptance and the growth of Islamic finance is the standardisation of Shariah law in order to avoid different interpretations and rulings inconsistencies. In January 2011 Malaysia introduced a new Shariah Governance Framework for Islamic financial institutions at national level aiming at implementing a homogeneous Islamic-based operating environment. A similar framework at international level, and publicly available documentation of Fatwa rulings, would further help in aligning and standardising the regulatory and operating framework of the industry. Most of the Islamic products seem to be a copy of


conventional products adapted to the Shariah framework and therefore miss authenticity. This adaptation comes with some costs, which put Islamic products at a cost and also often at a performance disadvantage compared to its conventional lookalike. The Islamic finance industry has to have genuine products that inherently meet the standards and requirements of Shariah. Furthermore, there is a lack of adoption of Islamic products by certain type of customers. Ernst & Young estimates in its Islamic Funds & Investment Report 2010 that the propensity to invest in Shariah-compliant products or assets ranges between 20 percent to 25 percent for high net individual investors and only 5 percent to 10 percent for Sovereign Wealth Funds from the Middle East. However, these investors hold a substantial amount of wealth which is held mostly in conventional products today. The lack of specific Islamic products or investment opportunities, or too high Shariah structuring costs, could be reasons for this lack of adoption. As there is a strong link between Islamic finance and Social, Responsible/Ethical Investments, putting Islamic finance into this area could potentially increase the adoption of Islamic products by other type of investors. Finally, there remains a number of regulatory hurdles. It is interesting to note that Shariah is often in conflict with local laws in various

jurisdictions in the Middle East when it comes to the design of Islamic products. Rules and regulations have initially been laid out for conventional products. The launch of Islamic products thus renders necessary a review of local laws and regulations as well as a new way of thinking for central bankers and regulators. Luxembourg can be of assistance to Islamic finance in different ways to lay the foundations to reach the next growth stage. Luxembourg can, for example, help to create a critical mass for Islamic products in Europe and beyond, by acting as a global hub and permitting Islamic financial institutions to leverage on the expertise of the financial center with regard to cross-border distribution, clearing and settlement of financial products. Moreover, Luxembourg could reconsider issuing a sovereign Euro Sukûk to provide a missing benchmark to the Islamic debt market. At the same time this would strengthen Luxembourg's position as a centre for Islamic finance. The potential for Islamic finance is huge. The Shariahsensitive wealth pool is estimated at USD 360 – 480 billion. However, in the end the fundamental point is that the new catalyst for Islamic finance must come from Muslim countries rather than Europe. By Pierre Weimerskirch


AGENCE DE PUBLICITÉ / 00(352) 26 10 81 12 / WWW.PIRANHA.LU


Industries Retail Banking

The strategic role of Customer Service in Retail Banking No bank manager can deny that customer satisfaction is a major concern for them. Today, according to Ernst & Young, 45% of the customers say the financial and economic crisis had a negative impact on their trust(1). If banks were not focused on customer loyalty and crossselling opportunities in their customer base in recent years, it seems like they cannot longer afford to ignore these issues to achieve growth during challenging times.

Erhan Çakmak

Managing Director of BrightPattern


In an ever-changing context, it is essential for banks to maintain a strong and mutually beneficial relationship with their customers. They need to focus on how price, service and product offering can drive customer satisfaction - as service quality is the most important criteria when choosing a bank(2). As service channels are moving towards online banking and telephone banking, new channels are also growing in popularity, like social media. Customers are increasingly more mobile and they know what they want. These requirements need to be met and facilitated with an integrated and consistent system across all channels of customer service.

The customer has to experience the same service independently from which department he chooses to talk to. A single, holistic view of customers’ concerns across all channels, departments and divisions is essential for a bank’s future.

A different interaction

Customers still require and demand personal relationships with their banks. Personalisation of services will help to retain customers. As attracting a new customer is rather costly for a retail bank -from two to six times more than for retaining an existing one, according to numerous research studies-, improving one-to-one relationships that help retain customers can be a real differentiator which cannot be easily copied by competitors.

Banks should consider investing in communications between departments.

This is of particular importance in the broader context of simplified customer mobility.


The European Banking Industry Committee (EBIC) adopted a set of principles in 2009(3) that directly affects the way banks should communicate with customers. The EBIC’s principles aim at helping consumers switch their current accounts from one bank to another within their own country by removing costs and paperwork that usually come with such a decision. In this process, the new bank acts as the customer’s primary contact. Competition is therefore reinforced, forcing retail banks to improve their customer retention strategies.

Rethinking communication Whether they are working in branches, call centres or delivering services online via email and chat, banks need to constantly upgrade their systems. In doing

Retail Banking Industries

so, they must think about the promised services to customers versus what they actually provide and definitely address deficiencies. They must address service levels and pricing for key customers using tools to track such incidents. Banks have acted pretty well to maximise branch service representative productivity by reallocating routine branch calls — such as requests for bank account information — to less costly channels as well as self-service options. But the other half of the equation is frequently missing. Banks cannot always offer a branch service representative expertise throughout the customer service centre. As a result, service representatives might be frustrated because they cannot do their jobs properly. Too frequently, they are not trained enough to ask the right questions to the customer, who becomes impatient as a result. The situation might worsen if he constantly gets referred to new representatives.

A single team Many banks are moving towards a virtual customer service centre to allow geographically dispersed service representatives to operate as a single, seamless team. When service representatives’ availability can be tracked, it becomes much easier to locate the right expertise

which can provide the right service. Branch, remote and expert integration allow the customer service centre to manage interactions based on business strategies and objectives. This way, higher-valued clients can be quickly referred to a highly skilled resource rather than waste time with the general call centre. Banks can also reduce costs by optimising information sharing. Successful retail banks ensure that their service representatives are productive across all contact channels to improve both employee and customer satisfaction. Every customer interaction must be explored as a business opportunity. In customer service centres, generating revenue through crossselling and up-selling is now as important as providing customer service. Banks can fully realise the potential strategic value of their customer service centres by better using interaction channels and integrating them in a consistent way. This helps foster a great customer experience, sell more products and services, and increase service representative productivity and satisfaction. By Erhan çakmak References (1), (2) Ernst & Young Survey The impact of the credit crisis across Europe - February 2010 (3) Find EBIC’s set of principles on http ://

Bright patterns The technology ‘ServicePattern’ can help to prevent attrition by personalising relationships across all communication channels. Bright Patterns’ virtual customer service centre is operated by voice over IP (VoIP) technology, bringing teams together across branches. Reporting and analytics help assess productivity by providing real-time and historical views on the performance metrics of customer service centres. ‘ServicePattern’ ensures each interaction is routed to the ideal resource with the right information, wherever that resource is located. The technology integrates phone, service tickets, email, social media, mobile and fax with back office business processes to improve back-office service representative productivity and customer service. Through this integration, customer service centre resources can be leveraged as part of workflow processes, such as processing a claim, fax, work order or other interaction. Internet and multimedia integration gives customers the chance to choose how and when to contact their banks.



Industries Alternative funds

The stepping stone A thirst for more: the acquisition of Fideos Luxembourg by Alter Domus, Luxembourg-based specialist in Corporate & Management services, Fund Administration and Financial Reporting, is a major step forward in the company’s growth strategy. In five years’ time, Alter Domus plans to have 1,000 employees across all its locations, and about 500 at the end of 2011 in Luxembourg. The domiciliation and accounting industry is very much fragmented today, calling for a broad and deep merger phenomenon in the near future. “We have been approached several times a month by buyers who argued competition would require us to be stronger, Dominique Robyns, CEO of Alter Domus, said. We realised that our business plan was ambitious but that we were at risk of losing the battle against bigger global competitors. That’s why we knew that we had to make a move and find an acquisition.” The opportunity soon came forward. In March 2011, Alter Domus was contacted by Inovia partners, the shareholders of Fideos. Only six weeks later, the deal was signed, although a few more weeks are needed to obtain the approval of the CSSF to acquire Fideos Financial Services.

Clear priorities Growing the Alternative Fund Administration business, extending the presence abroad and strengthening the brand in Luxembourg will be the company’s main goals for the next few years. ”If we wanted to continue playing with the big boys, we knew we needed to focus on clear priorities, said Dominique Robyns. Firstly, we don’t want to grow on UCITS, because we would then compete with the likes of RBC Dexia and EFA. Mainly, we want to grow our presence



in Alternative Fund Administration across all our locations. Private equity and real estate funds represent 70 percent of Alter Domus’s revenues, and 85 percent of Fideos’s. We want to go further into the services we already provide: Corporate and Management services, Alternative Fund Administration, and Financial Reporting." Secondly, Alter Domus aims to protect its leadership position in Luxembourg – the centre being very important for intermediary structures focusing on private equity and real estate. “We are one of the centre’s biggest players in the Coporate and Management services sector,” added Dominique Robyns.

Strong focus on recruitment Alter Domus is also going to put a strong focus on recruiting abroad – an obvious evolution for a company looking to expand on an international level. “In five years’ time,

we want to be 1,000 people – we are 500 today. In Jersey and Guernsey, the team already went from four to 13 people. In the Netherlands we plan for strong growth; we aim to add between 50 and 100 people in the next five years, and the same thing in Hong Kong and in Mauritius. In Cyprus, it will be about 30 people, and a maximum of 20 in Ireland, but mostly focused on Fund Administration and Financial Reporting. We are soon going to open an office in Beijing with an accountant and a sales manager, and another in London to focus on private equity and real estate.” Today, the acquisition of Fideos represents a 20 percent growth in total revenues, with 80 more employees. “We want to continue recruiting in Luxembourg and should reach about 500 employees before 2012. This shows that we give ourselves the means to have the right structure to double our size in the next five years. We remain ambitious.” By Delphine Reuter


Dominique Robyns, CEO of Alter Domus



Industries insurance

The “Luxembourgisation” of Ergo Fifteen years after starting business in Luxembourg, insurance company ERGO, which until last year was known as Hamburg-Mannheimer, is strengthening its identity reform by refocusing its core business on Luxembourg. “Brussels-based actuaries take care of product evolution, but the business is more and more centred on Luxembourg”, said Patrick Picco, in charge of Public Relations at ERGO Insurance S.A. and Relationship Manager at HMS Markets Luxembourg. If HamburgMannheimer opened its Belgian office 25 years ago, the Luxembourg branch followed only ten years later. That is when agents noticed that Belgian customers working in Luxembourg had little incentive to buy Belgian-centred insurance products. Local products adapted to Luxembourg’s favourable tax environment were definitely more interesting. “At first the customer base was made of frontier workers, said Patrick Picco. But little by little, it became an entirely Luxembourgish company with a different reality from Amsterdam, Brussels or Bonn.” Whereas decisions used to be made in Brussels for the Benelux region, today ERGO Luxembourg’s management has taken a local flavour. “We know the realities here, said Mr Picco. The company is really on the verge of being ‘Luxembourgised’. It is very likely that the company becomes a 100% Luxembourgish legal entity.” More insurance agents speak German and the company is now looking at hiring more native English speakers to address the increasing Scandinavian customer base present in the Grand Duchy.



Partnerships drive products evolution The company is slowly expanding since it became ERGO - a brand present in more than 30 countries serving over 40 million customers. “Luxembourg, with its 40 percent of foreigners, can easily export this brand as people recognise it home”, said Patrick Picco. At the end of 2010, Hamburg-Mannheimer was rebranded “ERGO” in reference to the group ERGO International based in Düsseldorf to which it belongs. This means that ERGO in Luxembourg has also access to the expertise and renown of asset management giant MEAG to which ERGO and Munich Ré belong. ERGO & Munich Ré, which represent more than EUR 200 billion within MEAG, are now drawing partnerships within and outside the group to enrich the product base. Four years ago, ERGO Benelux already started partnering with Belgian bank Degroof on a fund of fund the bank manages internally. “This way customer can access Degroof’s know-how with a small investment”, Patrick Picco explained. In Luxembourg, ERGO also partners with AXA and DKV and is looking at starting two other partnerships. The company is definitely beyond offering only life insurance products - this activity being grouped and re-branded under the name of ‘ERGO Life’.

Crisis-proof In 2008, the business grew by ten percent and was number one in Belgium for new complementary pension schemes contracts, before Fortis and Dexia. The financial and economic crisis surprisingly brought customers to get more interested in insurance offerings rather than favouring banks. “People understood that security was not a done deal”, Patrick Picco said. Securitywary customers consulted with ERGO and oftentimes chose to trust the company with their investments. “Even a person with a small savings account wants to diversify his assets. It’s easy for us to seek long-term security because we don’t seek a revenue of 15 to 20 percent per year.” ERGO, which claims having a 93-94 percent client retention, is now looking at maintaining its growth at the same level as 2010: about 30 percent. Today, the company has more than 613,000 customers in the Benelux region. By Delphine Reuter

Patrick Picco, in charge of Public Relations at ERGO Insurance S.A. Luxembourg and Relationship Manager at HMS Markets Luxembourg



Banking Industries


The ups and downs of leverage in Luxembourg’s banks Gaston Giordana

The leverage of banks is currently receiving a particular attention from both regulators and investors as it indicates the level of indebtedness of a bank and may be associated with higher levels of risk. In this article we discuss some recent research undertaken by two members of the Financial Stability Department at the Banque centrale du Luxembourg on banks’ leverage behaviour in Luxembourg. What has happened?

Economist, Financial Stability Department, Banque centrale du Luxembourg

Ingmar Schumacher

Economist, Financial Stability Department, Banque centrale du Luxembourg

The leverage ratio (assets divided by own funds) jumped into the centre of investors’ and policy makers’ attention towards the end of 2008. Those banks that had expanded their balance sheets during a period of low interest rates noticed that their increased leverage was unsustainable and they had to drastically shrink their balance sheets. This led to significant costs to the banking sector and also the real economy. In order to reduce the probability of future leverage cycles like the one that we saw around 2008 it is, therefore, important to understand what drives leverage in banks and what indicators can be used to predict adjustments in the level of indebtedness. The evolution of leverage in Luxembourg’s banks between January 2001 and March 2011 has mostly been driven by

changes in total assets, while own funds saw comparatively little adjustments. Total assets nearly doubled in the run-up to the financial crisis, while the increases in banks’ own funds were not sufficient to prevent the excess leverage. Indeed, the total banking sector’s leverage increased from 21 in January 2001 to a maximum of 27.5 in October 2008, and has since been decreasing back to its precrisis level. This increase in leverage cannot come from marking-to-market, since a pure marking-to-market effect would reduce leverage. The increase in leverage derives from a substantial rise in total credits, with changes to securities playing a minor role. Specifically, increase in banks’ balance sheets in Luxembourg is highly correlated with the growth in credits on the asset side, and with the growth in deposits on the liability side (correlation coefficients above 0.7),

while these growth rates are virtually uncorrelated with the growth in securities.

How can we explain this? In order to understand the reasons for this evolution in Luxembourg banks’ leverage we empirically investigated the impact of several relevant bank-specific variables as well as macroeconomic indicators(1). The data consist of individual banks' balance sheet reports on (a maximum of) 153 banks in Luxembourg with quarterly observations ranging from 2003 Q1 – 2010 Q1. One of the crucial bankspecific variables is the off-balance sheet exposure. We calculate this as the sum of committed credits, guarantees and liquidity facilities. The analysis suggests that the off-balance sheet exposure constrains the growth of leverage in



Industries Banking

a pre-crisis period, but it increases leverage growth during a crisis. This is intuitive in the sense that banks with a large amount of committed credits, guarantees or liquidity facilities are constrained in expanding their balance sheets because of the uncertainty that comes with these exposures. Banks are not always sure whether these commitments get exercised and whether they need to provide credits or not. As a precautionary measure those banks with large commitments tend to be those that increase their leverage the least. In contrast, large off-balance sheet exposures imply that during a crisis the banks cannot reduce their leverage by as much as other banks simply due to their commitments. Hence, during a crisis period, these banks have a larger growth in leverage than those with fewer commitments. In terms of macroeconomic indicators, the most important indicator for the build-up in leverage in the pre-crisis period is the spread between the Euribor 3 month rate and the Eonia rate. This spread measures the costs of obtaining funds on the interbank market net of the short-term expected movements of the ECB


reference rate. It reflects the risk premia that banks attach to providing funds on the interbank market. During the last crisis, one of the main components of the risk premia was liquidity risk. There is a positive correlation between this spread and the amount of leverage in the Luxembourgish banking sector. Indeed, when interbank funding becomes more expensive due to an enhanced risk perception or liquidity crunch, then Luxembourg’s banks will provide more liquidity for their mother companies or groups. Though the aforementioned spread is a good indicator for the build-up in leverage, we find that expectations are another key driver of the downturn in leverage during the crisis. As a measure for expectations we use the Economic Sentiment Indicator(2) provided by the European Commission. Among the macroeconomic variables that we investigated, this was the best predictor for the credit decline in Luxembourg. With worsened expectations due to an uncertain economic growth perspective, reductions in collateral values, a large debt overhang of European


countries and the turbulences on the financial markets in general, it is clear that even Luxembourg’s banks increased their risk aversion and reduced their credits.

The impact of Basel III As a general wrap-up we conclude, in the light of the discussions above, with some remarks on the potential impact of Basel III regulations. Firstly, the Basel III capital regulation includes an off-balance sheet augmented leverage ratio, which will reduce the extent to which banks can commit to contingent credits. In crisis periods this would imply that banks will face fewer constraints on their balance sheets as they have less commitments and can therefore adjust their assets more freely. It would, however, also imply that less credits will be provided, thus hurting the real economy. Since the Basel III liquidity regulations penalise interbank funding, we expect a shrinking of the interbank market with a potential increase in the Euribor 3 month rate. This may increase the demand for credit that Luxembourg’s banks supply to their mother companies

or groups. This effect will be particularly noteworthy for branches, since the liquidity regulations will be assessed on a consolidated basis. Increased funding from these branches will thus not reduce the (consolidated) Basel III liquidity ratios. As a final point we note that both the Basel III capital regulations and the Basel III liquidity regulations are likely to alter the ups and downs of Luxembourgish banks’ leverage cycle. Due to the emphasis on consolidated reporting in Basel III we envision the strongest adjustments in subsidiaries, while branches might not be significantly affected(3). By Gaston Giordana and Ingmar Schumacher

References : (1) The complete study is available from the authors (2) We calculate this as the average of the Belgian, French, German and Luxembourgish indicators (3) The views and opinions expressed in the article are those of the authors and do not necessarily reflect those of the Banque centrale du Luxembourg.

local NEWS


Saluzzi succeeds to Kremer at ALFI

market. Set up under the leadership of Alain Kinsch in 2004, today Managing Partner of the Luxembourg office and EMEIA Private Equity Fund Leader, the Ernst & Young Private Equity practice has been instrumental in the design of the SICAR law (Investment Company in Risk Capital). Ernst & Young closely collaborates in that context with the EVCA (European Private Equity & Venture Capital Association), the ALFI and the Luxembourg Private Equity & Venture Capital Association (LPEA).

Marc Saluzzi

It is without surprise that the Association of the Luxembourg Fund Industry (ALFI) elected Marc Saluzzi as its new president on 9 June 2011. Mr Saluzzi succeeds to Claude Kremer for a two-year presidency term. Mr Kremer becomes President of EFAMA (see Global news). Marc Saluzzi has been on the board of ALFI since 2001. He later joined the Strategic Advisory Committee and became Chairman of the ALFI Alternatives Committee in 2009. He acquired his 25-year experience in the Investment Management Industry in Luxembourg and in the U.S. He joined PricewaterhouseCoopers in 1986 and is now the partner responsible for PwC Luxembourg Financial Services practice. As such, he is a member of the firm’s country leadership team. Marc Saluzzi is also a member of the CSSF-OPC Committee.

Ernst & Young crowned for PE services On 1 June 2011, InterContinental Finance Magazine named Ernst & Young Luxembourg “Private Equity Advisory Firm of the Year in Luxembourg”. About 100 professionals are fully dedicated to Private Equity at Ernst & Young Luxembourg. Further to having the highest market share in the audit of Private Equity funds with over 47 percent of all SICARs by volume, Ernst & Young is also one of the leading tax advisors on Private Equity transactions. The firm setup the first PE advisory team on the local



Dexia AM: what will affect investments Dexia AM wrote in its latest study “Demography – Challenges and Opportunities in a Changing World” that companies should focus on five big upcoming changes that will affect their investments: a shortage of competencies, a growing demand for essential goods and services, consumers’ accumulation of wealth, the ageing of the population and a growing pressure on resources and the environment. For each of these challenges, there is an opportunity to invest in companies proposing solutions, according to the study. Shortage of competencies worldwide creates a need for companies specialised in education, employment, outsourcing services and automatisation. Essential goods and service like healthcare, food, financial services and telecommunications need to be supplied to the more than four billion people worldwide whose income is below USD 3,000. For seniors’ quality of life to be maintained, dedicated healthcare and financial services have to be provided. Finally, companies looking for long-term solutions for food production, hygiene, natural resources protection and sustainable development are becoming more attractive. Dexia AM wrote that SMEs offered more opportunities for growth than bigger competitors. But only with an in-depth look on regional specificities can investments truly be successful.

PwC launches first tax contribution survey PwC led a “Total Tax Contribution” survey, the first of its kind in Luxembourg. The respondants gave PwC access to their accounting results for the year 2008. Out of 56, a third represented the financial sector. People taxes (e.g. wage taxes, social security employee’s share) were the main taxes borne (40 percent) and taxes collected (61 percent). On average, 39 percent of the taxes borne paid by a company (financial and others) are social security contributions followed by corporate income taxes (i.e. CIT) with 25 percent. On average, a company mainly pays wage tax (i.e. 36 percent), VAT (i.e. 33 percent), as well as social security contributions employee’s share (i.e. 23 percent) as collected taxes. On average, 26 percent of the total taxes contributed (i.e. taxes borne and collected) by a participant are linked to the payment of VAT. In 2008, VAT paid by the participants represents 4 percent of the Luxembourg VAT revenue. More info on http ://

Fortuna Banque acquires PFS Finadvice

l. to r. : Charles Wagener, Gregory Claudy, and Doris de Paoli

Fortuna Banque, which was created in 1920 and offers banking services to individual customers for home and mortgage loans, savings, and deposits management, has

NEWS local

acquired PFS FinAdvice, created in 2006 by Doris de Paoli and Zora Back. Finadvice will keep its own branding and offering under their management. Following the merger, Mrs de Paoli will join the Board of Directors of Fortuna Banque, which is chaired by André Wilwert. Charles Wagener and Gregory Claudy will both remain directors of Fortuna Banque.

KPMG leading tax firm International Tax Review (ITR), a tax magazine, recently presented the final results of its fourth annual poll to find the world’s leading tax planning & tax transactional practices. Following a first poll of March 2011 identifying the best tax transactional practices, a second poll has focused on the tax planning leaders. For the fouth year in a row, KPMG was awarded a tier 1 ranking for both their excellence in tax planning and tax transactional work in Luxembourg.

A new European, fundorientated platform With UCITS IV including new fund registration and notification procedures, Europe is further opening its doors to facilitate crossborder fund distribution. To support the new legislation, CETREL Securities and KNEIP have joined forces to offer a new platform for the management of fund registration and notification. The solution will bring to asset managers and promoters a streamlined regulator-to-regulator procedure as well as greater visibility into the notification process. “This is a culmination of our reporting project that was started back in 2007 when we established the SOFiE SORT communication gateway through to the Luxembourg Bank Authority, said Renaud Oury, Executive Vice-President at CETREL Securities. Working with KNEIP has presented us with the opportunity to build a solution around the needs of the

asset managers, promoters, as well as administrators, auditors, and legal advisors.”

Launch of FGL Online Created to better respond to the needs of Luxembourg, transnational and international companies, FGL Online is a securised platform dedicated to clients of Fiduciaire Générale de Luxembourg. FGL Online is conceived to facilitate the transfer and filing of accounting, tax and legal documents which are digitised and securely stored on the platform. “This new tool will reduce the administrative workload so that clients can better concentrate on the development and realisation of strategic projects“, said Marc Meyers, Partner at Fiduciaire Générale de Luxembourg. Today, managing such documents can be complex and necessitate lots of emailing and faxing.

A Tax award for Allen & Overy

ners. Leading tax and legal firms from 26 jurisdictions across Europe were nominated for the awards.

ABBL chairman to head PROFIL

Ernst Wilhelm Contzen

On 1 July 2011, the Board of Directors of the Luxembourg Federation of Financial Sector's Professionals (PROFIL) elected Ernst Wilhelm Contzen as its new president. Previously Mr Contzen was vice-president of PROFIL; he is also chairman of the ABBL. He replaces Claude Kremer who will head the EFAMA.

l. to r. : Henri Wagner and Jean Schaffner

For the second consecutive year, the Tax team of Allen & Overy Luxembourg led by Jean Schaffner, Jean-Luc Fisch and Patrick Mischo received the "Luxembourg Tax Firm of the Year Award" at the 7th annual International Tax Review (ITR) organised by the International Tax Review. The awards were judged according to size of the deals, innovation, and complexity. The ITR's team of journalists undertook detailed research from a variety of sources to select the win-



local News

Five questions to... Jean Hilger, manager of the NGO Fondation Follereau Luxembourg (FFL) and Senior Vice President of the Banque et Caisse d’Epargne de l’Etat (BCEE). Most African pupils do not have access to technology for their education. This causes severe problems down the line: many jobs in Africa and abroad require to be tech aware. The North-South technology gap which is widening every day can be fought through initiatives like “Mind the Gap”, promoted by Fondation Follereau Luxembourg, an NGO mainly active in healthcare and community development. Companies can send second-hand workstations to Mali and Benin through FFL which takes care of collection and distribution. Why did you want to create “Mind the gap”?

Is it solely about CSR or is it more than that?

Luxembourg companies replace every four to five years their technical equipment to solve capacity or compatibility issues. That equipment may well be in perfect working order and able to serve another five-year term for training purposes in African schools. “Mind the gap” is not yet another trade of electronic waste shipped to Africa where environmental norms are low. It delivers operational PC’s that are donated and sponsored by Luxembourg companies.

Corporate Social Responsibility (CSR) is one of the new, widely interpreted buzz words. Some companies will make a general cash donation, while others will look for more precise projects they can financially support.

© Photography Raoul Somers

Who and what are you looking for?



We are looking for sponsors who can provide a large set of PC’s four to five years old which they can certify as being in perfect working condition. We estimate that the delivery of a single PC costs on average EUR 40 including storage, conditioning, shipment, customs, reconfiguration, training, and local delivery. This means that a donation of 20 PC’s needs an additional sponsorship of EUR 800 to finance distribution to African schools.

What do you think about Luxembourg companies’ interest in CSR today? What more could be done? CSR is still at its start. Like any other larger decision, it needs the support of the top management but it should not remain limited to external communication. CSR obviously has a second goal which is the motivation of the company’s staff. CSR policies, in my opinion, should be broader than donation and include the staff’s own action in favour of NGO’s and their projects. Interview by Delphine Reuter

nation > Seen from abroad - a Luxembourger in NYC p62 > Careers p65





©Rob Bennett Photography

Managing Director at Alvarez & Marsal, New York

Daniel Ehrmann

Seen from abroad - New York City



Four days later, Alvarez & Marsal signed a contract. Bryan Marsal would become Lehman’s

On the night of Sept. 14, 2008, as Lehman Brothers Holdings Inc.’s executives, directors and legal advisers scampered to prepare for what would in hours become by far the world’s largest bankruptcy filing, Bryan Marsal, co-founder of Alvarez & Marsal, got a phone call from the head of Lehman’s own restructuring group with an urgent request: Would Marsal’s restructuring firm, Alvarez & Marsal LLC, take the assignment as interim management for Lehman?

A key date in my career is, without a doubt, 15 September 2008, when the collapse of Lehman Brothers, the world’s fourth-largest bank, convulsed world markets. The fact that a 158-year-old firm, which survived railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, would file for bankruptcy came as a shock.

What was the biggest challenge you had to take on so far?

I am a Managing Director. My focus lies on developing and implementing operational turnarounds as an adviser or in an interim management capacity. My role is to lead companies through significant change by developing and implementing operating improvement plans across industries including apparel, retail, consumer products, professional and financial services. Currently, my position is Co-Head of the derivatives unwind group and the lead of international operations for the Lehman Brothers estate.

Can you describe your role at Alvarez & Marsal?

Luxembourg has developed a simple and responsive administrative environment.Luxembourg is also a country with a great political stability. This, along with the traditionally close relationship between business and authorities,

Change is key to survival. Just like human beings, countries need to adapt to their changing environment and embrace change instead of resisting to it.

If you left New York for Luxembourg today, what lessons or ideas would you try to bring back with you?

From an outsider’s perspective, Luxembourg needs to resist losing ground by making EU harmonisation-based concessions and focus on what it knows best. It needs to continuously innovate to further the development of its financial services which are the backbone of the country’s economy.

As Luxembourg’s competitive edge is tied to a services-oriented legislative framework, the EU harmonisation and increased competitiveness from other centres is impeding any future growth in this sector.

Luxembourg has experienced a severe set-back as a result of the world’s financial crisis. This follows a long period of continuous economic expansion during which living standards rose impressively and the economy was transformed by the growing financial centre and large flows of cross–border and migrant workers.

interim CEO, in the largest bankruptcy in history. How do you perceive the development of Luxembourg’s financial centre? If you had the power to change or improve something, what would it be?

For me, Luxembourg represents the place I grew up in. My family ties lie there. I also participate in New York City in the events organised by the Luxembourg-American chamber of commerce.

What is your relationship to Luxembourg today? How Luxembourger do you feel?

The greatest advantage is the multicultural upbringing, which is a great strength in building relationships but also in negotiations where understanding the other side’s perspective is key.

Has being from Luxembourg been an advantage for you in your business relationships? Has it been a disadvantage? How?

The image is certainly one of a peaceful, small, green country where the quality and standard of living are easy and comfortable. Luxembourg is famous as a founding member of the European Economic Community, a forerunner of the European Union and of course for its fiscal legislation favouring banks and holding companies.

What image(s) of Luxembourg do your colleagues and customers have?

Finally, the lifestyle that Luxembourg offers is unique.

assists the set-up of new business activities. Luxembourg’s central geographical position, its skilled and multilingual workforce make the country an interesting business location.

What are your hobbies in NY? Charity work (Board of Directors of Free Arts, NYC), sports, reading and lots of work

When did you start working in New York? In 2000

When did you leave Luxembourg? In 1989

Where did you grow up? In Luxembourg

How old are you? 41

What is your nationality? Luxembourgish

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People Nation


New commercial director at Capitalat Work Foyer Group

Laurent Vanderweyen’s extended role at J.P. Morgan

Puilaetco Dewaay recruits a senior private banker The bank Puilaetco Dewaay Luxembourg welcomed Claude Georges into its private banking team. Mrs Georges has more than ten years experience in the field of private banking acquired at BGL BNP Paribas Luxembourg.

Claude Eyschen became the commercial director of CapitalatWork Foyer Group on June 1 and will be member of the group’s management board. Mr Eyschen has a 16year experience in the banking sector and used to be Market Manager Luxembourg at Dexia BIL in Luxembourg.

Appointments at Foyer group

On 19 May 2011, Mr Vanderweyen became Head of Worldwide Securities Services in Luxembourg. He will have more responsibility for J.P. Morgan’s strategic planning in Europe in addition to the bank’s growth in Luxembourg. His expanded responsibilities include driving business development and providing business leadership while managing key clients and maintaining relationships with local regulators. He will also be responsible for overseeing local corporate functions and infrastructure.

HSBC appoints a Managing Director

Marc Lauer (left) and Gilbert Wolter (right)

On 10 June 2011, Marc Lauer became chairman of the board of directors of Foyer Vie S.A., whereas Gilbert Wolter became chairman of the board of directors of Foyer Assurances S.A. Both are members of the executive committee of the Foyer group. Marc Lauer has been Chief Operating Officer since 2004 and Gilbert Wolter, who joined the group in 1989, is Marketing and Commercial Director since 2001.

Emmanuel Lebeau becomes Managing Director at Opexia

On 1 March 2011, Brenda Petsche became Managing Director of HSBC Securities Services (Luxembourg) S.A. Mrs Petsche has spent 23 years in the financial services industry and is an active member of the Institut Luxembourgeois des Administrateurs (ILA). Previously she was Head of Client Delivery in the same company.

He has worked for BNP Paribas Luxembourg for 14 years and has a wide experience in financial engineering, wealth and asset structuring and management services. Before joining Opexia, he was Director of the Research and Development of Fidupar, a subsidiary of BNP Paribas group. Emmanuel Lebeau is a chartered accountant in France.



Nation People


A new Associate Director at NGR Consulting

ager with two European Investments Banks, he became consultant in an advisory firm and then undertook several roles as GM and COO in recovery or development context for subsidiaries and services companies. Florent was previously Country Manager for Robert Walters in Luxembourg for several years.

Marc Chalmeigné has an extensive experience in banking sector with several management positions in organisations such as Fortis, ABN AMRO and RBS. He was formerly the COO of the Hub France, Belgium and Luxembourg at RBS France.

Stibbe boosts Luxembourg offering with Paul Tulcinsky

Stibbe announces the hire of tax partner Paul Tulcinsky, formerly head of the tax team at Linklaters’ Luxembourg office. Paul Tulcinsky specialises in international tax law, in particular the setting up of acquisition and financing vehicles in Luxembourg. He also advises prime banks and major corporates on their strategic organisation and structuring.

Florent Terraux joins Greenfield as consultant He is responsible for developing recruitment services for the banking and funds industries. After six years as an Asset Man-



Thorsten Steffen new Director at ABAX Investment Services

Appointed early June 2011, Thorsten Steffen will be responsible for the operational and the business development aspects of ABAX Investment Services, a Luxembourg-based FSP specialising in fund administration and transfer agent services to the real estate and private equity investment fund industry. Mr Steffen previously worked for BDO Germany, Deloitte SA and lately, headed and implemented the alternative Investment fund platform for Aviva Investors in Luxembourg.


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Finance Nation Luxembourg 5  

Finance Nation Luxembourg - financial magazine covering news and analysis of Luxembourg financial industry

Finance Nation Luxembourg 5  

Finance Nation Luxembourg - financial magazine covering news and analysis of Luxembourg financial industry