Jerry Grbic, CEO of ABBL;
Credit: ABBL / PwC Luxembourg
On Tuesday 5 April 2022, the Luxembourg Bankers' Association (Association des Banques et Banquiers Luxembourg - ABBL) presented the results of its Corporate Banking Survey at an event held at PwC Luxembourg's Crystal Park premises.
To uncover the so-called "jewel" of Luxembourg's banking industry, PwC Luxembourg and ABBL, with the support of the Commission de Surveillance du Secteur Financier (CSSF), Luxembourg's financial regulator, and Luxembourg for Finance (LFF), teamed up to conduct the ABBL Corporate Banking Survey 2022. The survey was invitation-only, comprising an online qualitative questionnaire for chief executive officers (CEOs) and a set of quantitative questions addressed to chief financial officers (CFOs) of ABBL member banks. In addition, a series of virtual or field interviews were organised with those banks.
The survey aimed to take a closer look at the state of the corporate banking segment (considering the scarcity of studies in this area) in order to discover specific challenges and untapped opportunities. Achieving this goal did not come without its challenges, including the lack of a standard definition of corporate banking and the blurred lines between corporate banking and other banking segments. That being said, the study led to the identification of a diverse set of business models operated by corporate banks in Luxembourg.
The survey revealed that total corporate banking revenues from survey respondents had reached almost €2.5 billion at the end of 2020. "Given that our respondents represent about 80% of the entire corporate banking market in Luxembourg, we extrapolated total revenues for the entire corporate banking sector to be approximately €3 billion - 58.8% more than in 2016", stated the survey organisers.
The survey unveiled the growing optimism in the corporate banking segment, as well as the increasingly wide-spread recognition of the importance of innovation and digital transformation. Consequently, the survey found that many banks were on the brink of a total transformation journey, marked by a focus on sustainability, digitalisation and acquiring the right talent. Another key finding was the fact that while Luxembourg's regulatory ecosystem strongly positions it as a global hub, issues with over-regulation and cybersecurity remain to be addressed if the country is to continue to attract and maintain more global players in corporate banking.
Finally, the results emphasised the need for greater innovation and highlighted how not only banks but government and regulatory bodies can help to drive this paradigm shift within the corporate banking landscape.
Jörg Ackermann, Partner, FS Consulting, Banking at PwC Luxembourg, commented: "It is important to note that, despite their immense growth prospects and a relatively clear assessment of what is needed to strongly position the sector at both regional and global levels, a number of structural challenges still hinder corporate banks in Luxembourg and pose a barrier to the country’s attractiveness to other EU and non-EU banks. Through our survey, we have been able to identify three main challenges: overregulation, cybersecurity threats and the availability of key skills".
The survey recorded a relatively high response rate of 66% of all participants at the time of closing, with more than half of the corporate banks also providing clear details of their business figures. Collectively, these banks represent about 80% of the corporate banking market in Luxembourg and thus, the market insights presented in this report are considered representative of the aggregated data and feedback (qualitative and quantitative) obtained from banks' CEOs and CFOs.
Jerry Grbic, CEO of ABBL, said: "The high rate of participation makes this survey a one-of-a-kind evaluation that we hope will not only encourage the necessary conversations among industry stakeholders and spur on the innovative drive we are seeing but will also serve as a benchmark for future studies and assessments on the corporate banking sector in Luxembourg".
The complete survey results are available (in English) at: https://www.pwc.lu/en/banking/corporate-banking-survey.html
