Luxembourg plays a sophisticated key role in the world financial system. Its fund administration sector is the second largest in the world though its pre-eminent role in the European market, services which are also proving successful in Asia, the Middle East and South America. Private banking is the other main pillar of the financial industry: it is the largest in the eurozone and is ranked sixth in the world. The country has expertise in other domains, too, being an attractive base for life insurance and reinsurance companies, including leadership in the area of “captives”. Luxembourg also has a favourable environment for private and corporate Philanthropy thanks to a competitive tax framework and the advice and structuring services offered by the banking sector and the Fondation de Luxembourg.
This success can be attributed to a combination of factors. The country has built a reserve of expertise and its diminutive size gives it an outward-looking mentality, which is augmented by the multilingual, multicultural workforce. It operates against the backdrop of a stable political and social environment, supported by firm but sensitively-applied regulation. Laws are drawn up in consultation with the industry, with all parties eager to offer solid investor protection and robust action against money laundering. Financial firms are thus able to benefit from a range of flexible and sophisticated investment vehicles.
Luxembourg is also a popular centre for corporate finance, with many multinational groups establishing their head offices in the country. The stock exchange also has an important niche role, specialising in the listing of bonds, with more than 3,500 issuers from over 100 countries present. A special effort is currently being made in terms of Islamic finance. Luxembourg is the home of the leading international clearing and settlement house Clearstream.