Banking in Luxembourg

Banking in Luxembourg is a major sector of the economy of Luxembourg. Control and regulation of the banking sector is a responsibility of the Central Bank of Luxembourg and the Commission for Supervision of the financial sector. Most of the banks registered in Luxembourg are a part of the Association of Banks and Bankers of Luxembourg.

Overview of banking sector

On October 31, 2010 in Luxembourg, there were 148 banks. Most of the registered banks are represented by foreign institutions, there are only five local banks. Most of foreign banks are from Germany (44 banks). There are 123 banks from Europe (including Russia – 2), 13 from Asia, 10 – from America. On September 30, 2010, the volume of assets (liabilities) in the banking sector amounted to 777.218 billion euro. The number of banks in comparison with 2000 has decreased by a quarter, and the number of assets increased by 20%. In 2008, the number of bank branches was equal to 43, which is on 30 units more than in 1999. In 2008, the banking sector employed 27 208 people, representing 7.5% of the working population of Luxembourg. Number of employees in the sector compared with 1999 increased by 28.3%.

Offshore Banks

Most of foreign banks in Luxembourg are in an offshore area, as it has several advantages: a stable political system and legislation, a wide range of services offered by banks and non-bank financial intermediaries, high level of skill of financiers, lawyers and consultants, the confidentiality of customer information banks. These advantages allow large banks based in Luxembourg, have networks of branches of banks and companies abroad.

Banking secrecy

Luxembourg actively defends the right to keep banking secret. Large countries of the European Union require a change of bank secrecy laws in countries such as Luxembourg, Belgium and Austria, in order to avoid the "escape" of capital to countries with lower taxes. But Luxembourg does not agree to these measures, as fears of active outflows from their country to Switzerland, which is not included in the European Union and also protects the bank secrecy of their contributors. In 2009, the Minister of Finance and Budget of Luxembourg Luc Friden spoke about how to revise the legislation on banking secrecy, and start sharing information with other countries in cases of suspected tax law violations.

Tax on savings

In accordance with the directive of the European Union in July 2005 in Luxembourg, Austria and Belgium introduced a tax on savings, which is charged with interest income of owners of accounts in banks in these three countries. Until July 2008 the tax was 15%, until July 2011 it was 20%, then will be equal to 35%. 75% of tax revenue goes to the country of the European Union, a resident of which is the owner of the funds. The tax does not apply to the accounts of customers who are not residents of the European Union.