Central Bank of Luxembourg news and analysis articles - Central Banking (2024)

FAQs

Why does Luxembourg have so many banks? ›

Luxembourg provides an operational hub for many international financial institutions. Cross-border activities such as private and corporate banking, fund administration and custody, wealth management and treasury services, are run fluidly and effectively from the Grand Duchy.

(...) The Banque centrale du Luxembourg (BCL) is the monetary authority of Luxembourg and a member of the Eurosystem and the European System of Central Banks.

Credibility is also partially determined by the relative importance the central bank attaches to real and nominal economic objectives. Regular economic shocks and the manner in which the central bank manipulates monetary policy instruments dictate how credibility evolves over time.

International economies were on the brink of catching the flu after the Russian government and the Central Bank of Russia (CBR) devalued the currency, defaulting on massive debt reserves.

Superpowers such as China and the US have high overall GDPs. However, European countries dominate in terms of GDP per capita. With a GDP per capita of nearly $86 billion, Luxembourg is the richest nation in the world.

The debt-to-GDP ratio for non-financial companies (NFCs) in Luxembourg is large compared to other EU countries. The paper argues that this large ratio stems from a structural characteristic of Luxembourg pertaining to its role as a global financial center.

Luxembourg is a founding member of the European Union and one of the first countries to adopt the euro on 1 January 1999.

CSSF – The Commission de Surveillance du Secteur Financier is a public institution which supervises the professionals and products of the Luxembourg financial sector.

The official currency of Luxembourg is the Euro. Historically, the Euro Exchange Rate - EUR/USD - Luxembourg reached an all time high of 1.87 in July of 1973.

The U.S. Federal Reserve is one of the most powerful central banks in the world. The European Central Bank oversees the policies of the eurozone.

What is the risk of central banks? ›

What risks do central banks need to manage? Central banks typically expose themselves to a variety of risks, including market, credit, interest rate and liquidity risk (although the last of these can be mitigated – with unwelcome consequences – by the issue of currency).

Stephen Mitford Goodson created a masterpiece on the origin of Central Banking and the usury system. This book is prohibited in some countries because it tells different stories than the ones taught in schools and universities.

Spain holds the dubious record for defaults, having done so six times, the last being in the 1870s. Greece has defaulted five times since achieving independence in the 1820s but it hasn't defaulted since then.

Thus, a certain amount of money is always kept back and never circulates. A central bank which has the power to create unlimited quantities of its national base money cannot run out of reserves of that money because it never has any such reserves and never has any need for them.

Agrarian and progressive interests, led by William Jennings Bryan, favored a central bank under public, rather than banker, control. But the vast majority of the nation's bankers, concerned about government intervention in the banking business, opposed a central bank structure directed by political appointees.

Luxembourg's banking secrecy, enshrined in laws dating back to the 19th century, was long-established, providing broad data protection beyond just shielding from foreign tax authorities. Efforts towards tax transparency within the EU, like the EU Savings Directive, aimed to tax interest payments across Member States.

A solid and stable financial hub

A key characteristics of Luxembourg's financial sector is soundness which draws on the Grand Duchy's well-established political, economic, and social stability. Luxembourg's debt-to-GDP ratio stood at just 24% at the end of 2022 compared to the EU average of 86.4%.

Luxembourg, whose financial sector makes up 25% of its GDP, is the world's richest country by GDP per capita. With a population of just 660,000, the country is also considered a tax haven, incentivizing foreign investment due to its favorable tax policies.

Double tax treaties

The tax-friendly system in Luxembourg is a significant draw for companies looking to establish their presence in the country. Luxembourg entered a double taxation treaty with an impressive 86 countries worldwide, including major economic powers such as the United States, China, and Russia.