BNP Paribas Securities Services has benefited, and continues to benefit from an increase in its customer base, and the transfer to Luxembourg of funds historically located in other jurisdictions. This provides an ideal context for meeting the challenges of digitisation.
How do you analyse the markets’ development in Luxembourg?
We are seeing a marked growth in Loan Funds and more generally in Private Equity and Real Estate (PE/RE). We serve four types of customers: asset owners - pension funds, insurance, sovereign funds - UCITS fund asset managers, alternatives - Hedge funds or PE/RE - and financial intermediaries. Customers come to Luxembourg to nurture long-term performance. In the current climate, insurers and pension funds are increasingly turning towards Loan Funds, and PE/RE structure is popular across our entire client base. By creating general partnerships, Luxembourg has been able to position itself as a structured, regulated market with a flexible regulatory environment. Funds historically located in the Caribbean in particular have been transferred to Luxembourg, in addition there has been a significant growth in Reserved Alternative Investment Fund (RAIF) structures.
“Giants such as Alibaba show that money distribution circuits are changing.”
How do you absorb this significant growth?
Currently, we anticipate to on-board customers with commitments of 3-5 billion over the next two years. This creates challenges - particularly in choosing the right investments in our infrastructure - but also some constraints, especially with regards to human resources! Previously, banks domiciled in Luxembourg would strive and struggle to attract KYC or Risk specialists. We are now redoubling our efforts to attract PE/RE specialists – accountants and IT technicians. I believe that Luxembourg must invest and adapt its training programmes to take account of the shifting requirements. Educational institutions must ensure they tailor their courses to the country’s current and future needs. BNP Paribas Securities Services, for example, supports an FSP course in Arlon from which 20 people graduate every year.
What other changes are you involved in?
I can identify two. Firstly, green finance is establishing itself in a promising way. Following COP21 and COP22, we expect trillions of euros to flow into in investment vehicles. The Government has signed an agreement with the Agricultural Bank of China to list Chinese securities in Luxembourg, and facilitate their sale on the international market. This could help Luxembourg to position itself in green finance arena and set up a complete value-chain covering emissions, indices and reporting. The second area of change concerns our capacity to adapt to the challenges of digitisation. We have created a specific innovation department reporting to the CEO of BNP Paribas Securities Services, Patrick Colle, to set in motion our 3.0 version of banking, which will be totally digitally integrated. Giants such as Alibaba show that money distribution circuits are changing. We are working on artificial intelligence projects and multi-player infrastructure projects such as ‘Luxhub’, plus new payment infrastructure or KYC systems. Our ‘Fund Link’ project leverages a Blockchain methodology to facilitate workflows in the KYC sector.
How does the future look?
Luxembourg possesses a number of positive factors, but some areas must be managed to maintain its competitiveness, such as infrastructure, the scarcity of key resources and the need for a new collective employment agreement. I hope that some areas that have been held back by the 2018 elections will be dealt with quickly and in an efficient manner.