Jamie Dimon touched down for JPMorgan Chase & Co.’s golden jubilee in Luxembourg this month in the latest reminder of how the tiny European country is winning big business from Wall Street’s largest banks after Brexit.
(Bloomberg) — Jamie Dimon touched down for JPMorgan Chase & Co.’s golden jubilee in Luxembourg this month in the latest reminder of how the tiny European country is winning big business from Wall Street’s largest banks after Brexit.
With $59 billion in client assets and credit, JPMorgan is among the biggest foreign players in the Grand Duchy, which houses banking assets several times larger than its gross domestic product.
Its rivals are also becoming increasingly visible: Bank of America Corp. rolled out transaction services to firms including asset managers and corporates in May, while HSBC Holdings Plc established Luxembourg as its European Union hub for private banking in October.
Citigroup Inc. has increased headcount by 46% in the past two years and in late 2022 began offering wealth products to asset managers and other firms in Europe.
Luxembourg, wedged between Belgium, France and Germany, is bidding to grow its share of the financial services sector that’s fleeing London after the UK’s exit from the European Union. It’s leaning on its reputation for discretion, political stability and location at the heart of Europe to grow its stature.
“If you’re a provider of transaction services from the Fortune Global 500, clearly Luxembourg is somewhere you have to be,” Bank of America Europe DAC Chief Executive Officer Fernando Vicario said in an interview. BofA plans to “grow swiftly.”
JPMorgan has been operating in the nation since 1973. It widened its footprint in 2016 with a move into commercial banking and wealth management three years later.
Since Britain voted to leave the EU in 2016, more than 100 financial firms have either set up or expanded operations even though many of these decisions were made regardless of Brexit, according to the Luxembourg for Finance lobby.
Bankers say that political and social stability are burnishing Luxembourg’s appeal. It has had only five prime ministers in the past 60 years; the UK had three leaders in 2022 alone.
The country hasn’t seen a strike since 1998, according to Nicolas Mackel, chief executive officer of Luxembourg for Finance. Net debt stood at about 25% of gross domestic product at the end of 2022, among the lowest in Europe.
“From a client perspective, it’s a very unstable world,” HSBC Luxembourg CEO Emanuele Vignoli said in an interview. When clients “deposit their money here there’s a lot less risk.”
While hiring staff in a country of only about 650,000 people presents its own set of challenges, the number of finance jobs is rising. Much of the growth is outside of banking, with the number of so-called specialized professionals of the financial sector seeing a 15% jump to just over 7,000 people in the first quarter from a year earlier. That data, from Luxembourg’s financial regulator, captures areas including family offices and the administration of savings funds.
More than 3,000 staff have either relocated or had new jobs created in the Grand Duchy due to Brexit, according to Luxembourg for Finance.
One area where Luxembourg is facing stiff competition is where it’s been the world’s number two for a long time — the hosting of funds.
Assets under management have slumped 14% to $5 trillion as at the end of December compared to the year before, according to a June report from the Association of the Luxembourg Fund Industry. Net outflows reached €167 billion in a decline that followed Russia’s invasion of Ukraine and was impacted further by rising rates and spikes in inflation.
The country also needs to do more to improve the detection, investigation and prosecution of complex money-laundering cases, according to global watchdog Financial Action Task Force.
Still, Luxembourg continues to lure players from across the globe.
Apollo Global Management Inc. launched wealth services to investors in Europe, the Middle East, Africa, Asia and Latin America in May. Actis LLP is also expanding.
Banks in Asia and Latin America are now considering the viability of setting up shop, according to Guy Hoffmann, chairman of the Luxembourg Banker’s Association.
Bank of London said earlier this month it had applied for an EU banking license in Luxembourg and would invest €200 million and hire 300 people over five years.
The firm decided against Dublin because the city wasn’t sufficiently open to new banks and avoided Paris partly due to years of unrest, Group Chief Executive Officer Anthony Watson said in an interview.
People usually “don’t know about Luxembourg at all or have very preconceived ideas,” said Philippe Ringard, senior country officer at JPMorgan. “Dating back 20 years there wasn’t much happening in the country or city. This is completely different today.”
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