During 2020, the Private Banking Cluster performed its annual Private Banking Survey, in collaboration with the CSSF.  The credit institutions participating in the survey represent over 95% of the private banking business in Luxembourg. The figures stated are as at 31 December 2019 - the impact of the COVID-19 pandemic is therefore not reflected.

The survey highlighted the following key findings:

  • AUM: Assets under management in Luxembourg reached a total of €466BN by the end of 2019. This is a 107% increase since 2008 (€225BN); a doubling of assets, the result of 11 consecutive years of growth
  • Wealth bands & number of accounts: Clients with assets over €20M represented 58% of total AUM at year end of 2019. The number of clients with assets of less than €1M continues to decrease (only 8% of total AUM in 2019)
  • Geographic analysis: In terms of geographic origin of assets, Europe undoubtedly is the core market (85% of total AUM)
  • Employment: The private banking sector employed 6,224 people in 2019 (6,676 in 2018)
  • Population: 54 banks, representing over 95% of the private banking industry in Luxembourg

466 billion EUR in assets

Assets in Luxembourg have more than doubled in the space of 11 years, reaching 466 billion euros in 2019. If the market effect partly explains this development, it nevertheless remains considerable and exceeds the forecasts of the last survey, which estimated 450 billion as total assets in 2019.

This figure testifies to the attractiveness of the Luxembourg financial center for private banking clients, who appreciate Luxembourg’s political, economic and regulatory stability, as well as it’s triple A rating, which reinforces this attractiveness.

The private banking sector therefore represents 11% of the value added to GDP by the financial sector as a whole in Luxembourg.

New standards for private banking

More high and ultra-high net worth clients are drawn to Luxembourg, with an increase in the proportion of clients with over 20 million euros. Market share of UHNW clientele is increasing year by year, representing 58% of total assets in 2019.

Conversely, the share of clients with less than 1 million euros continues to decline: while the assets of this client segment were 13% of total assetsin 2015, they measured only 8% in 2019.

This change in the client population implies new requirements for the private banking sector, which has had to design more sophisticated products and services especially for this segment, in order to remain efficient and serve them adequately. The evolving client base is accompanied by new standards in terms of digital access to information, which must be transparent, immediate and reliable.

European clients

85% of the assets come from European clients, of which 21% reside in Luxembourg and 17% in neighboring countries. These figures are stable compared to 2018.

A slight decrease in employees in private banking

The private banking sector recorded a slight decrease of 6.8% of employees, with 6,676 fulltime employees in 2018 compared to 6,224 in 2019. This decrease also affected client-facing staff, from 1,462 in 2018 to 1,365 in 2019, a decrease of 6.6%.This decrease is to be seen in the following context:

  • The number of private banks decreased from 57 in 2018, to 54 in 2019.
  • The banking sector as a whole remains stable in terms of the number of employees.

Short and medium term outlook

There are great opportunities for private banks. Starting with Brexit, which confirmed the attractiveness of the Luxembourg financial centre, many institutions having chosen Luxembourg as an anchor point to establish themselves in Europe and ensure their clients the continuity of their services within a single market.

In recent years international private banks have strengthened their presence in the European market from Luxembourg using the EU passport (freedom to provide services) and/or by creating a network of branches. The ecosystem available to private banks in Luxembourg also offers a real asset in the completeness of its range of services (bankers, consultants, lawyers, insurers), all the more appreciated in a context where customers are becoming more complex in their needs and requirements. asset management and structuring solutions.

The pandemic has been a major challenge for private banks, which nevertheless have been able to adapt and take the necessary measures to maintain their profitability, by accelerating digitalisation and remote services. And this, both for customers and employees, including working from home, supported by the measures taken by the CSSF. A key for private banks: many opportunities in terms of communication, new technologies, client relationship management and reporting.

The second challenge for private banks concerns profitability. The growing increase in regulatory costs, a negative interest rate environment, the need to invest in operational systems and the creation of new products and service all impact the profitability of private banks in Luxembourg.