In order to gain a better understanding of the Depositary and Custodian Banking sector in Luxembourg, the ABBLhas launched a first national survey on these industries in collaboration with the Commission de Surveillance du Secteur Financier (CSSF). The study sheds a light on two professions which many people are unfamiliar with. Its results, which concern the 2021 figures, highlight the good health of these trades.
Two different kinds of businesses
Custody is the "traditional" activity of depositing and holding securities on behalf of third parties. This activity has evolved over time depending on the clients for whom it was provided, particularly in the case of investment funds, where its scope significantly increased due to the adoption of dedicated sectoral standards (AIFM and UCITS directives). In these cases, the activity is referred to as depositary, which covers the activity of custody and safekeeping, but is also accompanied by other obligations such as supervision and control, as well as a specific liability regime in this area.
Growth of assets, market concentration and a stable workforce
In Luxembourg, the depositary bank business has developed in parallel with the growth of the investment fund industry. It kickstarted in 1988, when the country was a first mover to transpose the UCITS Directive. In 2021, the industry represented EUR 6,5tn assets under deposit (AuD). The 22% growth compared to 2020 being mainly due to market performance. In the same period and for the same reasons the custodian banking sector also grew, with assets under custody (AuC) up to EUR 5,5tn (+15%).
Both markets are heavily concentrated with the top 10 players holding approx. 78% of AuD in one industry and around 88% of AuC in the other. Staff numbers have been constant with 953 people (FTEs) working in depositary supervision functions and 1.204 in custody and safekeeping operations, thus representing around 10% of total banking staff working in Luxembourg.
Press Release - ABBL/CSSF Depositary Banking & Custodian Services Survey 2022 (28 November 2022)
Highlights of the Depositary Banking & Custodian Services Survey
ABBL/CSSF Depositary Banking & Custodian Services Survey 2022
Figures stated as at 31 December 2021