“Guaranteeing Fair Banking for All Americans” – Trumps latest executive order. Is there a lesson for Luxembourg?
CSSF’s contribution to the reputation of the Luxembourg financial place cannot be overstated.
And yet … here’s an unpopular opinion: the CSSF is both a blessing and a curse.
Financial performance is all about intelligent, well-managed risk taking.
Then how come some borrowers cannot get mortgages from any Luxembourg bank but the same borrowers obtain mortgages for the same Luxembourg-based real estate projects in neighboring Germany? Isn’t the risk even greater for the German banks due to discontinuity in jurisdiction?
And how come start-ups cannot open bank accounts in Luxembourg but the same start-ups are offered bank accounts in traditional banks in neighboring France? Isn’t the risk even higher for French banks?
Let’s pause a bit and reflect: what do all Luxembourg banks have in common?
You guessed it: they are all under the uncompromising scrutiny of the CSSF.
How can Luxembourg seize the “once in several decades” opportunity of reshaping the financial place and positioning it for the future … when risk-taking is blocked or seriously hindered?
A possible answer comes from Trumps recent “Guaranteeing Fair Banking” executive order.
Trump doesn’t trust federal banking regulators, so it brought in an overseer, the “Small Business Administration” (SBA), a non-bank regulator. Because untrammeled power is never a good situation and invariably leads to exaggeration.
“Checks and balances” are the landmark of good institutional architecture.
We strongly advocate for Luxembourg to create a counter-power for the CSSF. By creating a new agency or repurposing an existing one, with a clear mandate to support innovation and risk taking, Luxembourg can decrease the risk that over-caution will make the country miss the Bitcoin / Crypto revolution that is going to upend the financial world in the near future.
