PSF Landscape in Luxembourg: Trends, Evolution, and Job Overview

2023-08-30 12:04:47

Created in 2003, the professionals of the financial sector, more commonly identified by their French acronym PSF, are in Luxembourg supervised by the Financial Sector Supervisory Commission (CSSF), which devotes a section of its 2022 annual report to them.

These companies provide a wide range of financial, technical and organizational services, including but not limited to asset management, fund administration and advisory services. PSF are divided into three main categories: investment firms, specialized PSF and support PSF.

Evolution of the PSF landscape

In 2022, Luxembourg experienced a drop in the number of investment firms, which fell from 101 to 95, including 88 national firms and seven branches from the European Union, details the CSSF. Unlike in 2021, when six new licenses were granted, no new PSF company was created in 2022. However, a new European branch was created.

The number of specialized PSF fell from 96 to 100 and that of support PSF decreased by three, to 66. These changes suggest an ongoing remodeling of the sector, driven by the changing demand for financial services in Luxembourg.

Main activities among FSPs

As of December 31, 2022, portfolio management remained the predominant service among investment firms, although the number of entities authorized to provide it increased from 83 to 78.

In the specialized PSF segment, company domiciliation agents and professionals offering company incorporation and management services come out on top with 82 and 84 approved entities respectively.

Among the support PSF, 71 entities were approved as registration agents on the same date.

Job Overview

Despite a decline in the number of investment firms, total employment fell from 1,903 people at the end of 2021 to 1,958 people at the end of 2022.

Employment in specialized PSF increased by 15.1%, reaching 6,852 employees at the end of the year. Conversely, employment in support SFPs declined from 8,951 to 8,704 over the same period.

In total, the total workforce of PSF in Luxembourg amounted to 17,514 people as of December 31, 2022, an increase of 4% compared to the previous year.

Financial health

Investment firms saw their balance sheets shrink by 8%, from €1.06 billion in 2021 to €974 million in 2022. Net profits also saw a sharp fall of 33%, from €116 million euros to 77 million euros.

On the other hand, specialized PSF saw their balance sheet increase slightly by 1%, from 6.17 billion euros in 2021 to 6.24 billion euros in 2022, and their net income increase considerably by 181%, from 91 million euros to 255 million euros.

Support PSF also saw improvements, including a modest 3% increase in their balance sheet from €1.63 billion at 31 December 2021 to €1.68 billion one year later. Net profit increased by 28% from 70 million euros to 90 million euros during the same period.

Regulatory oversight

The CSSF took measures once morest several companies which had not complied with the regulatory standards.

Two investment firms were subject to such measures for failing to comply with minimum capital requirements, and five others for failing to comply with capital ratios.

One company was scrutinized for lack of liquidity and another was put into voluntary liquidation for non-compliance with capital requirements, while another corrected its situation.

The CSSF also identified 12 specialized PSF and five support PSF which were not in compliance with the legal provisions, which represents an increase compared to the six entities in each category in 2021.

Administrative fines

In 2022, the CSSF imposed six administrative fines on investment firms, for a total amount of €1.77 million, compared to three fines in 2021.

In addition, two entities specialized in PSF received fines amounting to €266,000 and €198,750, while two support PSF entities were sentenced to fines amounting respectively to €18,750 and €6,000.

This article was written by Delano in English, translated and edited by Paperjam in French.

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