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Economy and Banking Sector of Luxembourg

Luxembourg
Location
Western Europe
Population  (2017)
590 667  (+0.02%)
EU Status
member since 1952
Currency
EUR (Euro)
Nominal GDP (2016)
54.2 bln EUR  (+0.04%)
Credit Ratings (as of Sep 2016)
AAA/Aaa
Consolidated Banking Assets (2016)
845.77 bln EUR  (+4.26%)
Deposit Guarantee
100 000 EUR
Number of Banks
145

Luxembourg, a country in Western Europe, is bordered by Belgium, Germany, and France. It's a founding member of the European Union.

Luxembourg has stable, high-income, highly diversified market economy. Main industries of Luxembourg are banking and financial services (accounting for a quarter of GDP),production of steel and chemicals, information technology and telecommunications, and tourism.

Banking sector is the largest sector in the Luxembourg economy. Luxembourg is the most important private banking centre of the Eurozone.

List of Banks in Luxembourg
Banks in Luxembourg

National Currency

Euro (EUR)

Luxembourg joined the Euro Area on 1 January 1999.

GDP

Nominal GDP (2016)Nominal GDP per Capita (2016)Real GDP Growth (2016)
54.2 bln EUR  (+0.04%)92 900 EUR  (+0.01%)4.2 %  (2015: 4.8 %)

According to Eurostat, nominal GDP of Luxembourg in 2016 was 54.2 bln EUR.

Luxembourg outperforms the European Union in terms of real GDP growth with the average annual differential coming to 1.8% over the past 10 years (2006 - 2016). In 2016 real GDP growth was 4.2% which was above the Euro Area average (1.8%) and above the European Union average (1.9%). Real GDP growth in 2017 - 2022 are IMF's estimates.

Real GDP Growth in Luxembourg.

Chart 1. Real GDP Growth in Luxembourg. Source: Eurostat, International Monetary Fund.

In 2016, nominal GDP per capita in Luxembourg was 92 900 EUR.

Luxembourg has an above-average level of wealth in terms of per-capita GDP at purchasing power parity (PPP); this economic welfare indicator has, on average, exceeded that of the European Union by 149.6% over the past 10 years (2006 - 2016). GDP per capita at PPP in 2017 - 2022 are IMF's estimates.

GDP Per Capita at Purchasing Power Parity in  Luxembourg; European Union = 100.

Chart 2. GDP Per Capita at Purchasing Power Parity in Luxembourg; European Union = 100.

Inflation Rate

CPI, MoM (Sep 2017)CPI, YoY (Sep 2017)CPI, Year Average (2016)
0.0 %  (Aug 2017: 1.4 %)2.0 %  (Aug 2017: 2.3 %)0.0 %  (2015: 0.1 %)

According to Eurostat, inflation rate in Luxembourg in 2016 expressed as annual percentages of average consumer prices was 0.0% which was below the Euro Area average (0.2%) and below the European Union average (0.3%). Inflation rates in 2017 - 2022 are IMF's estimates.

Inflation Rate in Luxembourg.

Chart 3. Inflation Rate in Luxembourg. Source: Eurostat, International Monetary Fund.

Unemployment Rate

Unemployment Rate (2016)
6.3 %  (2015: 6.4 %)

Government Bond Yield

Government Bond Yield (Sep 2017)
0.55 %  (Aug 2017: 0.57 %)
According to Eurostat, government bond yield in Luxembourg in Sep 2017 was 0.55%, compared to 0.57% in Aug 2017.
Government bond yield of Luxembourg.

Chart 4. Government bond yield of Luxembourg. Source: Eurostat.

Credit Ratings (as of Sep 2016)

Fitch Moody's
AAA (highest credit quality), outlook stable Aaa (prime), outlook stable

Withholding Tax

Withholding taxes are imposed at source of income and are often applied to dividends, interest, royalties, rent and similar payments. The rates of withholding tax are often reduced by double taxation agreements.

Withholding Tax Rates in Luxembourg: 0.0 - 15.0%

Withholding tax rates applied on payments of interest and dividends in Luxembourg are shown in Table 1.

Dividends Interest
Natural person, resident 0.0 %10.0 %
Natural person, non-resident 15.0 %0.0 %
Table 1. Withholding tax rates in Luxembourg.

Double Taxation Agreements

Double Taxation Agreement (DTA) is an agreement between two or more countries for the avoidance of double taxation.

DTAs of Luxembourg: 79 Signed Agreements

Luxembourg signed DTAs which already came info force with the following jurisdictions (for agreements which came into force after 1 January 2013 the date of coming into force is given in brackets):

 Armenia
 Austria
 Azerbaijan
 Bahrain
 Barbados
 Belgium
 Brazil
 Bulgaria
 Canada
 China
 Czech Republic
 Denmark
 Estonia
 Finland
 France
 Georgia
 Germany (Sep 2013)
 Greece
 Guernsey (Aug 2014)
 Hong Kong
 Hungary
 Iceland
 India
 Indonesia
 Ireland
 Israel
 Italy
 Japan
 Kazakhstan (Dec 2013)
 Korea, Republic of
 Lao People's Democratic Republic (Mar 2014)
 Latvia
 Liechtenstein
 Lithuania
 Macedonia (Jul 2013)
 Malaysia
 Malta
 Mauritius
 Mexico
 Moldova, Republic of
 Monaco
 Mongolia
 Morocco
 Netherlands
 Norway
 Panama
 Poland
 Portugal
 Qatar
 Romania
 Russian Federation
 San Marino
 Seychelles (Aug 2013)
 Singapore
 Slovakia
 Slovenia
 South Africa
 Spain
 Sri Lanka (Apr 2014)
 Sweden
 Switzerland
 Tajikistan (Jul 2013)
 Thailand
 Trinidad and Tobago
 Tunisia
 Turkey
 United Arab Emirates
 United Kingdom
 United States
 Uzbekistan
 Vietnam

There are also several agreements between Luxembourg and other jurisdictions which were signed but haven't yet come into force (for agreements signed after after 1 January 2013 of signing the agreement is given in brackets):

 Albania
 Czech Republic (Mar 2013)
 Isle of Man (Apr 2013)
 Jersey (Apr 2013)
 Kuwait
 Saudi Arabia (May 2013)
 Sierra Leone (Oct 2013)
 Ukraine

Information Exchange

There are 3 ways for jusrisdictions to exchange information on tax matters:

  • spontaneously;
  • on request;
  • automatically.

Spontaneous exchange of information is provision of information that is forseeably relevant to another party without a request being previously sent.

Tax Information Exchange Agreements (TIEAs) enable exchange of information on request relating to a specific tax investigation, either criminal or civil.

Automatic information exchange allows jurisdictions to exchange information automatically, without having a specific tax investigation.

Automatic Exchange: Starts in September 2017

Luxembourg signed the automatic information exchange agreement on 29 October 2014 and committed to start the automatic information exchange in September 2017.

Automatic Excnange: 58 Bilateral Agreements to Receive Information

Luxembourg has signed bilateral agreements with 58 jurisdictions to automatically receive information:

 Andorra
 Argentina
 Australia
 Austria
 Belgium
 Bonaire, Saint Eustatius and Saba
 Brazil
 Bulgaria
 Canada
 China
 Colombia
 Croatia
 Cyprus
 Czech Republic
 Denmark
 Estonia
 Faroe Islands
 Finland
 France
 Germany
 Gibraltar
 Greece
 Greenland
 Guernsey
 Hungary
 Iceland
 India
 Ireland
 Isle of Man
 Italy
 Japan
 Jersey
 Korea, Republic of
 Latvia
 Liechtenstein
 Lithuania
 Malaysia
 Malta
 Mauritius
 Mexico
 Monaco
 Netherlands
 New Zealand
 Norway
 Poland
 Portugal
 Romania
 San Marino
 Seychelles
 Singapore
 Slovakia
 Slovenia
 South Africa
 Spain
 Sweden
 Switzerland
 United Kingdom
 Uruguay

Automatic Excnange: 70 Bilateral Agreements to Send Information

Luxembourg has signed bilateral agreements with 70 jurisdictions to automatically send information:

 Andorra
 Anguilla
 Argentina
 Australia
 Austria
 Belgium
 Belize
 Bermuda
 Bonaire, Saint Eustatius and Saba
 Brazil
 British Virgin Islands
 Bulgaria
 Canada
 Cayman Islands
 China
 Colombia
 Costa Rica
 Croatia
 Cyprus
 Czech Republic
 Denmark
 Estonia
 Faroe Islands
 Finland
 France
 Germany
 Gibraltar
 Greece
 Greenland
 Guernsey
 Hungary
 Iceland
 India
 Indonesia
 Ireland
 Isle of Man
 Italy
 Japan
 Jersey
 Korea, Republic of
 Latvia
 Liechtenstein
 Lithuania
 Malaysia
 Malta
 Mauritius
 Mexico
 Monaco
 Montserrat
 Netherlands
 New Zealand
 Norway
 Poland
 Portugal
 Romania
 Saint Lucia
 Saint Vincent and The Grenadines
 Samoa
 San Marino
 Seychelles
 Singapore
 Slovakia
 Slovenia
 South Africa
 Spain
 Sweden
 Switzerland
 Turks and Caicos Islands
 United Kingdom
 Uruguay

Further Information

FATCA

Foreign Account Tax Compliance Act (FATCA) which became law in the United States in March 2010, focuses on reporting made by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest. The FATCA-reporting is facilitated by Intergovernmental Agreements (IGAs).

FATCA Status in Luxembourg
IGA in effect since 28 March 2014, Model 1

Luxembourg has FATCA agreement with the U.S. in effect since 28 March 2014 (Intergovernmental Agreement Model 1). Financial institutions operating in Luxembourg are required to identify U.S. taxpayers by January 1, 2017 and to report the information for 2017 and the subsequent years. The agreement is reciprocal: Luxembourg financial accounts hold in U.S. financial institutions will be reported to Luxembourg authorities.

Further Information

Financial Market Development

Financial Market Development
5.0 (max 7.0), 15th out of 138 countries
Banks' Soundness
6.1 (max 7.0), 9th out of 138 countries

According to World Economic Forum's Global Competitiveness Report 2017-2018, financial market development in Luxembourg is scored 5.0 out of maximum 7.0 and ranked 15th out of 138 analysed economies, trustworthiness and confidence of financial market is scored 4.9 (30th place).

Financial Market Development in Luxembourg.

Chart 5. Financial Market Development in Luxembourg. Source: WEF.


Soundness of banks is scored 6.1 bringing Luxembourg into the 9th place.

Soundness of Banks in Luxembourg.

Chart 6. Soundness of Banks in Luxembourg. Source: WEF.

Further Information

Deposit Guarantee Scheme

Maximum Protected Amount
100 000 EUR

Deposit Guarantee Schemes compensate certain deposits held by depositors of a bank that becomes unable to meet its obligations.

From a depositor's point of view it is important to know:

  • if the depositor is eligible within the terms of the deposit guarantee scheme;
  • if the depositor's bank is a participant in the deposit guarantee scheme;
  • if the depositor's type of deposit is covered by the deposit guarantee scheme.

All these details about deposit guarantee scheme in Luxembourg are summarised in Table 2.

Scheme Participantsall credit institutions operating in Luxembourg, branches of non-EU banks, branches of Luxembourg banks abroad
Scheme Exemptionsbranches of EU-banks (covered by their home countries)
Eligible Depositorsnatural persons, small businesses with headquarters in EU
Covered Accountsall cash deposits
Covered Currenciesall
Maximum Protected Amount100 000 EUR
Paid In CurrencyEUR

Table 2. Deposit guarantee scheme in Luxembourg.

Further Information

Country Ceiling for Deposits

Moody's country ceilings for deposits specify the highest rating that can be assigned to local- or foreign- currency denominated deposit obligations of a bank or other deposit taking institution domiciled within that country.

Local Currency (Euro) Foreign Currency
Aaa (prime) Aaa (prime)

Local currency (Euro) deposit ceiling for Luxembourg is set to Aaa (prime), foreign currency deposit ceiling is Aaa (prime).

Deposit Rates

Average Deposit Rate (Aug 2017, EUR)
0.07 %  (Jul 2017: 0.13 %)
In Aug 2017, an agreed annualised deposit rate in local currency (Euro) of new contracts with agreed maturity up to 1 year between credit institutions and households was 0.07% which was below the Euro Area average (0.36%).
Deposit Rates in Luxembourg.

Chart 7. Deposit Rates in Luxembourg. Source: ECB.

Banking Sector Structure

Number of Banks
145
Consolidated Assets (2016)
845.77 bln EUR  (+4.26%)
Recent Changes (2016)
new banks: 3, closed banks: 6

Currently there are 145 credit institutions operating in Luxembourg.

In 2016 consolidated banking assets in Luxembourg were 845.77 bln EUR. The consolidated banking assets' evolution is shown at Chart 8 below.

Consolidated banking assets in Luxembourg.

Chart 8. Consolidated banking assets in Luxembourg.

Recent structural changes (2013 - 2016) of the banking sector of Luxembourg are summarised in Table 3.

2013201420152016
Number of Opened Banks7923
Number of Closed Banks1966

Table 3. Recent structural changes in the banking sector of Luxembourg.

The list of the most recently opened banks in Luxembourg is provided in Table 4.

All the credit institutions operating in Luxembourg can be classified into several categories. Table 5 summarises the number of banks in each category.

CategoryNumber of Banks
Banks98
Branches of foreign banks46
Central banks1

Table 5. Number of banks by category in Luxembourg.

There are 46 branches of foreign banks from 14 different countries in Luxembourg. Table 6 shows 10 countries having the biggest number of branches in Luxembourg.

Country of OriginNumber of Branches
 Germany15
 China7
 United Kingdom5
 France4
 Switzerland3
 Sweden2
 Brazil2
 Portugal2
 Belgium1
 Cyprus1

Table 6. Number of branches of foreign banks in Luxembourg grouped by country of origin.

Major Banks of Luxembourg

RankName
1 Deutsche Bank Luxembourg S.A.
2 Societe Generale Bank & Trust S.A.
3 Banque et Caisse d’Epargne de l’Etat, Luxembourg
4 CACEIS Bank, Luxembourg branch
5 BGL BNP Paribas
6 UniCredit Luxembourg S.A.
7 Commerzbank Finance & Covered Bond S.A.
 

Deutsche Bank Luxembourg S.A.

Deutsche Bank is a universal bank, one of the biggest European banks in terms of total assets. Deutsche Bank has large presence in Europe, the Americas, Asia-Pasific countries and emerging markers. Deutsche Bank provides a wide range of retail, corporate and investment banking products as well as asset and wealth management.

In 2016 total assets of Deutsche Bank Luxembourg S.A. were 51 787,00 mln EUR. In 2016 the bank's annual profit was 1 067,00 mln EUR.

Deutsche Bank Luxembourg S.A. participates in deposit guarantee scheme of Luxembourg. This scheme covers accounts up to 100 000 EUR per bank per depositor.

Societe Generale Bank & Trust S.A.

Societe Generale Bank and Trust provides private banking and securities services.

In 2016 total assets of Societe Generale Bank & Trust S.A. were 42 188,00 mln EUR. In 2016 the bank's annual profit was 310,00 mln EUR.

Societe Generale Bank & Trust S.A. participates in deposit guarantee scheme of Luxembourg. This scheme covers accounts up to 100 000 EUR per bank per depositor.

Banque et Caisse d’Epargne de l’Etat, Luxembourg

Banque et Caisse d'Epargne de l'Etat (BCEE) is a universal bank offering a broad range of retail and corporate products and services to individuals, families, SMEs and business entities. BCEE is a state-owned bank, its sole shareholder is the State of Luxembourg.

In 2016 total assets of Banque et Caisse d’Epargne de l’Etat, Luxembourg were 43 445,00 mln EUR. In 2016 the bank's annual profit was 240,00 mln EUR.

Banque et Caisse d’Epargne de l’Etat, Luxembourg is rated by Moody's. Long-term credit rating assigned to the bank by Moody's is Aa2 (high grade). Banque et Caisse d’Epargne de l’Etat, Luxembourg participates in deposit guarantee scheme of Luxembourg. This scheme covers accounts up to 100 000 EUR per bank per depositor.

CACEIS Bank Luxembourg

CACEIS is a French banking group offering acomprehensive set of services covering depositary and custody, fund administration, transfer agency, and issuer services to institutional and corporate clients. CACEIS Bank Luxembourg operates as a branch of CACEIS Bank (France).

In 2015 total assets of CACEIS Bank Luxembourg were 46 082,00 mln EUR. In 2015 the bank's annual profit was 84,00 mln EUR.

CACEIS Bank Luxembourg participates in deposit guarantee scheme of France. This scheme covers accounts up to 100 000 EUR per bank per depositor.

BGL BNP Paribas

Banque Générale du Luxembourg (BGL) was founded in 1919 as a regional bank. Since 2009, BGL bank is a member of BNP Paribas group and offers products and services in the areas of retail banking, wealth management, corporate and investment banking to individuals and professionals, business entities and institutional investors.

In 2016 total assets of BGL BNP Paribas were 33 933,00 mln EUR. In 2016 the bank's annual profit was 185,00 mln EUR.

BGL BNP Paribas is rated by Fitch, Moody's. Long-term credit rating assigned to the bank by Fitch is A+ (high credit quality). Long-term credit rating assigned to the bank by Moody's is A1 (upper medium grade). BGL BNP Paribas participates in deposit guarantee scheme of Luxembourg. This scheme covers accounts up to 100 000 EUR per bank per depositor.

UniCredit Luxembourg S.A.

UniCredit Bank (Luxembourg) provides wealth management and corporate banking products and services.

In 2016 total assets of UniCredit Luxembourg S.A. were 20 272,00 mln EUR. In 2016 the bank's annual profit was 36,00 mln EUR.

UniCredit Luxembourg S.A. is rated by Moody's. Long-term credit rating assigned to the bank by Moody's is A3 (upper medium grade). UniCredit Luxembourg S.A. participates in deposit guarantee scheme of Luxembourg. This scheme covers accounts up to 100 000 EUR per bank per depositor.

Hypothekenbank Frankfurt International S.A

Founded in 1870, Commerzbank is an international commercial bank with branches and offices in more than 50 countries. The core markets of Commerzbank are Germany and Poland. Commerzbank offers its products and services to private and corporate clients, as well as institutional investors.

In 2016 total assets of Hypothekenbank Frankfurt International S.A were 17 599,00 mln EUR. In 2016 the bank's annual profit was 59,00 mln EUR.

Hypothekenbank Frankfurt International S.A is rated by Fitch, Moody's. Long-term credit rating assigned to the bank by Fitch is A- (high credit quality). Long-term credit rating assigned to the bank by Moody's is Baa3 (lower medium grade). Hypothekenbank Frankfurt International S.A participates in deposit guarantee scheme of Luxembourg. This scheme covers accounts up to 100 000 EUR per bank per depositor.

Credit Cards: 4 Offers from 1 Bank

Annual Costs: 0.00 - 0.00 EUR

4 credit cards offers from 1 bank operating in Luxembourg are currently available. The annual costs of the credit cards are within the range of 0.00 - 0.00 EUR.

View All Offers
Lowest Annual Costs Offer: free MasterCard Gold (Advanzia Bank S.A.)
Annual Costs: 0.00 EUR

Incorporated in 2005, Advanzia Bank is a small Luxembourg-based bank, adhering to the classical banking model: the bank provides only two products to natural persons: credit card loans and deposit accounts.

Having a Luxembourg banking licence and taking advantage of European banking legislation, Advanzia Bank offers its products and services across borders within the EU/EEA.The credit cards are offered to individuals in Germany, France and Luxembourg, whereas the deposit accounts are available to individuals in other European countries as well.