Luxembourg stands out as one of the leading financial centers in Europe, boasting several unique characteristics. Notably, the banking sector in Luxembourg is one of the most crucial contributors to the country’s economy. The combined assets of the Grand Duchy's banking institutions exceed ten times the country's GDP. However, this remarkable figure is not solely attributable to domestic banks; rather, it underscores another defining characteristic of the industry: the prominent role of foreign banks within the country.
Luxembourg features the most internationalized banking industry in the Benelux region. At the end of 2023, assets held by foreign-controlled banking groups constituted over 90 percent of the industry’s total assets. Germany and China stand out with the strongest presence, accounting for over 25 percent of all banks in Luxembourg.
Luxembourg's banking sector, a cornerstone of its economy, boasts exceptional attributes. Dominated by foreign banks, it serves as a global financial hub. The sector's international appeal is evident, attracting significant deposits from non-Luxembourgian households. Overall, Luxembourg's banking industry continues to thrive, poised for further growth in the global financial landscape.
Luxembourg features the most internationalized banking industry in the Benelux region. At the end of 2023, assets held by foreign-controlled banking groups constituted over 90 percent of the industry’s total assets. Germany and China stand out with the strongest presence, accounting for over 25 percent of all banks in Luxembourg.
An EU passport for private banking
The primary reason for the high number of foreign banks in Luxembourg is to gain access to the EU internal market, using an EU passport to provide financial services across Europe. They particularly focus on private banking and asset management. Private banking is a financial service that is generally aimed at clients with a larger portfolio than regular customers, such as high-net-worth individuals (HNWIs). This latter group of customers seems to be the main focus of the banking industry, as clients with assets worth over five million euros represented approximately 80 percent of private banking in the Grand Duchy. Luxembourg hosts many specialized private bank branches from outside the country. An example of this is HSBC Private Bank, a division of the UK bank that was established in Luxembourg in 1977 and almost exclusively focuses on wealth management for HNWIs. The assets under management of the private banking sector in Luxembourg increased steadily in the last decade, reaching 585 billion euros in 2022.Retail banking trends
When it comes to developments in retail banking, Luxembourg boasts high usage rates of online banking services and digital payments. In 2023, over 70 of the population used the Internet at least once for banking services. The number of credit and debits cards also increased steadily in recent years, reaching over eight million in 2022. Additionally, banks in Luxembourg receive a significant amount of household deposits. Non-Luxembourgish household deposits in banks in the Grand Duchy were worth over 46 billion euros in 2023, underlining the international character of retail banking in the country.Luxembourg's banking sector, a cornerstone of its economy, boasts exceptional attributes. Dominated by foreign banks, it serves as a global financial hub. The sector's international appeal is evident, attracting significant deposits from non-Luxembourgian households. Overall, Luxembourg's banking industry continues to thrive, poised for further growth in the global financial landscape.
