Luxembourg is the world's last remaining Grand Duchy. Why is this small western European country so appealing as a financial center? And why do all the leading banks have a presence in Luxembourg?
With its surface area of 2,586 km2 it is Europe's second-smallest country, and yet its central position gives it a strategic advantage. Nestling between France to the south, Germany to the east and Belgium to the west, it enjoys a favorable reputation as a meeting-point of different European cultures. Luxembourg, Belgium and the Netherlands together form the Benelux countries, which operate a high degree of economic and political cooperation based on a customs union adopted as far back as 1960. Luxembourg is a EU member state and home to a number of important European institutions, including the European Court of Justice, the Court of Auditors of the European Communities, the European Investment Bank and the Secretariat of the European Parliament.
The Advantage of Internationalism
The nearly 500,000 citizens of Luxembourg are remarkable polyglots: in addition to the native Luxembourg tongue, German and French are official languages, and virtually everyone can also speak English. On top of that, the client advisors of Luxembourg banks are liable to speak several other European languages, principally Dutch, Italian, Spanish and Russian. And because of the large number of Portuguese immigrants (who make up nearly 20% of the population), Portuguese is also widely spoken.
Luxembourg has managed to turn itself into a leading international financial center. It now ranks as the number one location for private banking in the European Union, the most important center for investment fund management outside of the USA, and Europe's premier location for life insurers operating on a pan-European level.
The finance sector is the kingpin of Luxembourg's economy. In the Global Financial Centres Index for 2009, Luxembourg occupied 16th place. As at November 2009, 148 banks were officially registered as active in Luxembourg, the vast majority of these being subsidiaries or branches of major foreign banks. These institutions had total assets (likewise as at November 2009) of 789.2 billion euros. At the same date, the net asset values of the 3,473 Luxembourg-registered investment funds (organismes de placement collectif) amounted to 1,788.91 billion euros.
Thriving Financial Center
As a world-class international financial center situated at the heart of the European Union, Luxembourg is well known for the advantages it confers. These include economic and political stability, modern and flexible legislation, high levels of professionalism and expertise, multilingualism and a multicultural atmosphere, strict regulation and a favorable operating environment for banking relationships.
This climate has helped to create ideal conditions for investment funds, banks, insurance companies and wealth management firms. And Luxembourg can also boast extensive investor protection as well as stringent anti-money laundering regulations. The country's multicultural bent makes it easy to accommodate the needs of an international clientele in a highly flexible manner.
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