luxembourg, your european hub

Magazine | MARCH / ApRil 2015

Making the engine roarTHE LUXEMBOURG TEAM BEHIND LOTUS F1

Dossier

LUXEMBOURG, yOUR EUROpEAN pLATFORM

Why international banking groups choose luxembourg

luxembourg as your gateway to Europe: The RBC experience

More than 30 years of welcoming islamic finance to luxembourg

international real estate investments: on solid ground in luxembourg

luxembourg’s disaster recovery solutions

Framing the future of corporate governance

Dear readers,

luxembourg’s financial centre has a few strong cards in its game, some of which many people may not be familiar with. it is the aim of this publication to make these assets known among our global client and investor community. in this magazine we are featuring a series of articles on different ways to look at luxembourg as a possible platform for financial services operations for global actors.

Yves Maas, the Chairman of the Bankers’ Association (ABBl) highlights the diverse range of activities banks pursue from luxembourg. These do not only span asset management and wealth management, two areas in which luxembourg has built a solid name, but also corporate finance and other activities such as treasury management or covered bonds.

With a view to the financial mission headed by HRH Crown prince Guillaume, accompanied by HRH Crown princess Stéphanie, and led by Minister pierre Gramegna to the Gulf region in early March, you will not only find articles on luxembourg’s expertise in islamic finance but also on how luxembourg provides added value in a variety of sectors in the region.

For our following mission to Canada in April, Royal Bank of Canada explains to our readers why they have chosen luxembourg to set up their very significant operations and use the country as their hub for fund distribution and administration. This is yet another testimonial of the very positive role luxembourg's financial centre can play in the European strategy of a global player such as RBC.

As a financial centre that lives by the trust of its international clients and investors, luxembourg takes its responsibilities towards its stakeholders very seriously. To illustrate this point, Marie-Jeanne Chèvremont, the Chairperson of luxembourg’s institute of independent Directors, talks to us about corporate governance, training and the implementation of new rules.

Finally, we round off with a roar from the Formula 1 engines that are powered by luxembourg private equity star Gerard lopez of Skype fame who unveils the history of his involvement with the lotus F1 team.

Enjoy the read.

NiColAS MACKEl

editorial | P.2

Nicolas MAckEL, CEO,

Luxembourg for Finance

euroPean Platform dossier | p. 3

Between 2013 and 2014, 10 new banks were established in luxembourg, both from the “old Continent” as well as from non-EU countries. The Grand Duchy today counts 143 banks from 27 different countries.

While certain doomsayers predicted that the introduction of the automatic exchange of information would spell the end of luxembourg as a banking centre, reality has proven them wrong. There are several reasons why such a decline did not take place.

First of all, and contrary to popular believe, luxembourg’s success in private banking is not built on banking secrecy, but on the quality of its services and the high level of cross-border expertise on offer. Moreover, the luxembourg private banking industry was well prepared for the introduction of automatic exchange of information. over the past 4 years, assets under management have remained stable thanks to the inflow of new UNHWiS and internationally mobile clients. Tax transparency has been an opportunity for luxembourg private banks and wealth managers to expand into new markets and attract new clients, some of whom may have previously shied away because of the stigma of banking secrecy. This new clientele requires expert wealth and succession planning services for their businesses and their family, more often than not on a multijurisdictional scale. This is what they find in luxembourg.

An increasing number of international banks establish their luxembourg entity as a wealth management competence centre for international clients. luxembourg’s eurozone location and EU membership offer a high degree of complementarity, as well as a number of competitive advantages, vis-à-vis other major European private banking centres such as london or Switzerland. And luxembourg’s AAA status and political, fiscal and financial stability is not only a key argument for banks themselves, but also for their clients and their investors.

importantly, however, there is much more to luxembourg as a banking centre than wealth management, even if the latter remains an important and dynamic pillar of activity. indeed, the diversity of luxembourg’s banking sector contributes significantly to its stability and attractiveness for international groups.

Yves MAAS, Chairman of the Luxembourg

Bankers’ Association (ABBL)

| WhY iNtErNAtiONAL BANkiNg grOups ChOOsE LuxEmBOurglUxEMBoURG

Yves Maas is Managing Director and CEo of Credit Suisse S.A.

in luxembourg. Mr Maas is the Chairman of the luxembourg

Bankers’ Association (ABBl) and a Board Member of the European

Banking Federation (EFB).

As Chair of ABBl, the professional organisation representing the

majority of banks and other financial intermediaries established in

luxembourg, he acts as the voice of the whole sector on various

matters in both national and international organisations.

WHy INTERNATIONAL BANkING GROUpS

cHOOSE LUXEMBOURG

The vast majority of banks in luxembourg have a universal banking license. While some banks have specialised in one particular activity, many make full use of their universal license to offer a broad range of services to private and corporate clients.

More than half of the banks present on the financial centre play a central role in luxembourg’s thriving fund industry. leveraging on the country’s position as the world’s leading cross-border investment fund platform, banks in luxembourg have specialised in global custody, fund administration and offer a full range of fund services from product creation, management companies services to custody.

Beyond the universal banking license, luxembourg regulation also foresees a special license for banks issuing covered bonds. The luxembourg covered bond regime offers the highest levels of investor protection, a broad scope of eligible countries (all oECD countries are included) as well as the possibility to use movable assets such as ships or planes.

luxembourg has become a key location for corporate finance services. Many banks in luxembourg have specialised in organising and structuring syndicated loans to finance international, cross-border projects. luxembourg’s expertise in the international credit business already dates back to the 1960s, when the country played a central role in the Euromarkets. Moreover, luxembourg is generally regarded as having one of the world’s best laws on financial collateral due to full protection against insolvency risk as well as an efficient and safe enforcement process.

Non-EU banks, in particular, are using luxembourg as their hub to support the Euro liquidity needs of their corporate clients in the Eurozone. Having such a hub allows banks to provide loans in Euro to their corporate banks clients. For instance, luxembourg is today home to the major Chinese banks who have set up their European headquarters in luxembourg. locating in the Grand Duchy enables them to leverage the EU passport in order to branch out and accompany their corporate clients throughout the single European market.

Many non-EU banks, including Swiss banks, also consolidate their cash pooling and euro treasury in luxembourg. They can thus leverage their luxembourg entity as an interface into the European Central Bank system.

Finally, banks in luxembourg have access to the services of a comprehensive financial centre ecosystem that includes essential market infrastructures, such as the luxembourg Stock Exchange and post-trade service providers such as Clearstream, family offices, insurance companies, lawyers, tax experts, consultants, auditors, accountants as well as a unique regulatory framework that allows banks to outsource iT and operational processes to service providers that are fully regulated by the financial sector supervisor.

Whether in private banking, fund services or corporate finance, luxembourg is the ideal location for banks to set up a pan-European hub to offer financial products and services on a cross-border basis.

By Yves maas

By scanning the Qr code below,

watch the full video interview with

Yves maas


Yves MAAS

"Non-EU banks are using luxembourg as their hub

to support the Euro liquidity needs of their

corporate clients."

| LuxEmBOurg As YOur gAtEWAY tO EurOpE thE rBC ExpEriENCE

lUxEMBoURG

RBC investor & Treasury Services, part of Royal Bank of Canada

is one of the twenty largest employers in luxembourg and among the top five employers

in the financial sector. The iconic bank in the south of luxembourg

administers large pensions and investment funds.

lFF spoke with Sébastien Danloy, the CEo of RBC investor Services

SA, who heads RBC i&TS’ business in luxembourg, Continental Europe

and offshore, to find out why luxembourg is important to the

Canadian bank.

LUXEMBOURG AS yOUR GATEWAy TO EUROpE

THE RBc EXpERIENcE

LFF: What are the services and Products that You offer in luxemBourg?

SD: RBC i&TS is a leading specialist provider of asset servicing, custody, payments and treasury services for financial and other institutional investors worldwide. We serve clients from 18 locations across North America, Europe, Asia and Australia. We deliver custodial, advisory, financing and other services to safeguard clients’ assets, maximize liquidity and manage risk in multiple jurisdictions. RBC i&TS is ranked among the world’s top 10 global asset servicing businesses.

in luxembourg, the majority of our clients are fund managers with head offices in international locations who manage luxembourg domiciled funds. For these clients, we undertake cash management, compliance monitoring, custody, depositary services, foreign exchange, fund administration, securities lending, share class hedging and shareholder services.


LFF: WhY are You Based in luxemBourg and What Benefits does this Bring?

SD: luxembourg remains a key international fund centre for the global asset managers we serve and is the second-largest fund centre globally after the USA by total net fund assets.

Having an activity in luxembourg is therefore imperative in order to compete in the global custody and fund administration industry. We administer the luxembourg-domiciled funds of asset managers from across Europe, along with clients from Asia and the US, looking to benefit from the expertise of luxembourg as a fund centre. Complimentary to this, thanks to our local presence in ten countries in Europe, locations in Hong Kong, Singapore, Malaysia and Australia, and our presence in New York and of course across Canada, we are also able to offer fund managers from these countries custody and fund administration services for their domestic fund ranges.

RBC i&TS (and its predecessors) has a long history in luxembourg and was the first to service a UCiTS fund 25 years ago.

Being based in luxembourg allows us to benefit from the local fund administration and custody expertise of the market, developed over several decades now and supported by the Grand Duchy’s robust regulatory framework. our luxembourg activity is important for our service offering aimed at the local and cross-border distribution strategies of fund managers in Europe and elsewhere (notably North America and Asia) especially given the importance of UCiTS funds (Undertakings for Collective investment in Transferable Securities) in luxembourg. A highly regulated and standardised fund vehicle aimed at increased investor protection, UCiTS allow fund managers to distribute their products throughout Europe from one domicile within the region.

This is especially the case as UCiTS products have continued to extend their international reach in recent years, and pension reforms that will occur in Europe signal that long-term investments in Europe are set to grow, with UCiTS benefiting over the long term as a result. As of June 30, 2014, net assets of UCiTS funds worldwide totalled USD 10.2 trillion 1.

1 Quarterly statistical release, European Fund and Asset management Association, as at June 30, 2014

sébastien DANLOyManaging Director, Continental Europe

and offshore,

RBC investor & Treasury Services


LFF: What is Your client Profile and hoW is that changing?

SD: We traditionally provide services to medium-sized asset managers and institutional investors, with assets from EU countries predominantly using UCiTS fund structures for their cross-border distribution strategies. Many clients for example will be from Switzerland, the UK, italy, France…

As levels of disposable wealth increase and a rising middle class emerges across Asia, notably in China, we also continue to see clients from the region as asset managers there look to UCiTS which are a popular investment vehicle given their high levels of investor protection.

We are also increasingly seeing demand from mid-sized North American asset managers looking at offshore fund domiciliation and distribution through luxembourg in order to commercialise their funds in Europe.

As returns from traditional asset classes remain constricted, alternative asset classes like private Equity and Real Estate are becoming popular with institutional and qualified retail investors, and luxembourg is developing a reputation as a specialised hub for administration of these particular fund types.

LuxembourgforFinance

What Benefits does Being Part of rBc Bring Your activitY?

Sébastien DANLOy

Strength and solidity are crucial for our custody and depositary banking activities and the solidity and reputation of the RBC enterprise and “Brand Canada” are allowing us to grow in these areas.

Companies outside of Canada are increasingly receptive and interested in doing business with us, especially sovereign wealth funds and governments that place great emphasis on the financial solidity and credit rating of the counterparty opposite them. RBC has an AA- S&p credit rating

and a strong balance sheet which is particularly important in Europe, where we are considered a significant credit institution and supervised by the ECB, and in the investor Servicing industry under

new AiFMD and UCiTSV regulations.

Moreover, we are able to offer our clients a greater range of products and services as we can leverage the full service offering of RBC, helping to deepen relationships, and we can offer

our complementary services to existing clients of RBC from other segments such as Wealth Management and Capital Markets, or to commercial banking clients thanks to our transaction

banking services.


sébastien DANLOy

“luxembourg remains a key international fund centre for

the global asset managers we serve and is the second-largest fund centre globally

after the USA.”

LFF: What does luxemBourg need to do to maintain its leading Position?

SD: it is not by accident that luxembourg has developed such a leading position in fund administration; the industry has a strong and effective representative body – AlFi - and the continued promotion of the Grand Duchy is important for continued success, especially with new partners and jurisdictions in Asia and latin America

The reputation of UCiTS for investor protection and strong regulation has also been important for luxembourg’s performance as a fund centre since the crisis. The country’s deep-rooted expertise and experience in UCiTS, developed over more than twenty-five years, means it has benefitted from a head-start that few of its international rival centres can match, at least in the short-term.

Whilst fund administration and domiciliation in luxembourg benefit from the country’s stable regulatory and legal framework, the quality of human capital is even more important and essential for maintaining its leading position. luxembourg also has a highly-skilled domestic labour market, produces motivated and quality graduates, as well as benefitting from employees from across the borders of France, Belgium and Germany.

indeed, this multicultural aspect to business in luxembourg is essential when dealing with global clients as we do. According to the latest official figures from STATEC, we are among the twenty largest employers in the country and in the top five employers in the financial sector. We are the largest employer in the luxembourg fund industry and we currently have almost 30 nationalities represented amongst our employee base. We are also a founding signatory of the luxembourg Diversity Charter, which is supported by the Government and believe that diversity is an important success factor. GM

"Multicultural aspect to business in luxembourg is

essential when dealing with global clients."


sébastien DANLOy

gloBal trends in islamic finance

islamic finance has grown into a global industry, with total assets of around USD 1.9 trillion. The Economist estimates that nearly 80% is entrusted either to islamic banks or to the islamic units of conventional banks, 15% to sukuks, 4% to islamic investment funds and 1% to takaful, the islamic version of insurance.

Jean-Michel pacaud, partner at EY luxembourg, explains: “We have not yet received the final figures of 2014, but in 2013 the global islamic banking assets were at usD 1.7 trillion. the estimate is that by the end of 2014 the figure should be close to usD 1.9 trillion, representing an annual growth of 16 % since 2008.”

islamic banks serve about 40 million clients globally, with the highest concentration in Saudi Arabia, Malaysia, Turkey and indonesia.

When asked about the driving factors behind this growth, Jean-Michel pacaud explains that the authorities in high-growth emerging markets consider islamic finance an effective way to build an inclusive financial system and to replace the shadow economy.

S&p recently warned that global sukuk issuance could be hampered in 2015 by a slowdown in emerging markets as reduced confidence and low oil prices may hit investor demand.

During recent decades, luxembourg has clearly demonstrated its

ambition to become the Eurozone hub for islamic finance and has

put the right wheels in motion to encourage institutional investors

who wish to serve Europe’s Muslim community.

MORE THAN 30 yEARS OF WELcOMING

ISLAMIc FINANcE TO LUXEMBOURG

| mOrE thAN 30 YEArs OF WELCOmiNg isLAmiC FiNANCE tO LuxEmBOurglUxEMBoURG


“it is still too early to analyse the consequences of the lower oil price. the countries that are strongly dependent on oil and gas might need to issue debt. this debt could be conventional or shariah compliant”, he says.

Demand for sovereign sukuks is strong. “in today’s environment of low interest rates, sukuks offer a better return based on the type of assets. For example, in Luxembourg the return is based on three government properties, the two towers of the gate of Europe in kirchberg and the gutenberg building in strassen. the rental income of the European Commission provides a stable and predictable return”, he adds. “Also, the majority of the state issuers from the region are in a much better financial situation than Western European countries. in other words, the credit risk to the issuers is perceived to be lower.”

one financial centre, thousands of exPerts

islamic finance remains a fast growing industry that offers immense opportunities in need of a growing number of finance professionals that are acquainted with the specific services and products. Relying on its expertise in international finance, luxembourg is well placed to further develop the platform of knowledge sharing for conventional and islamic finance.

“Luxembourg is the largest domicile for islamic funds in Europe, and the third largest domicile for islamic funds worldwide, after malaysia and saudi-Arabia”, explains Germain Birgen, Head of Business Development at Banque de luxembourg.

“Leveraging on the infrastructure and expertise in conventional finance, many service providers in Luxembourg started over ten years ago to add islamic finance to their offering. more than 40 islamic investment funds have been created and are currently serviced by Luxembourg banks, fund administrators, legal and tax advisors and audited by international audit firms”, he continues.

A dedicated committee within the fund administration body, AlFi, was created in 2007 to focus on the specific needs and expectations of Middle Eastern clients as well as fund managers active in islamic finance. Representatives of various service providers based in the region second this committee.

Jean-michel pAcAUD

partner,

EY luxembourg

germain BIRGEN

Head of Business Development,

Banque de luxembourg


“ALFi is planning to publish an updated version of its ‘Collection of best practices in setting-up and servicing islamic funds’. the intention is to continue attracting specialised fund managers to use the Luxembourg experience and existing market infrastructure to set-up and manage funds that can be distributed globally to both muslim and non-muslim investors”, points out Germain Birgen.

2014: luxemBurg issues the first sovereign euro-denominated sukuk

For the third consecutive year, global sukuk issuance has exceeded the USD 100 billion threshold. 2014 also saw new jurisdictions issuing sukuk, among which countries such as the United Kingdom, Hong Kong, South Africa, Senegal and luxembourg with its debut sovereign sukuk.

The € 200 million issue by luxembourg was the first sovereign sukuk issued in Euro and was more than twice over-subscribed.

“the Luxembourg stock Exchange listed 3 important sukuk issues in 2014, the Luxembourg and south African sovereign sukuks as well as the goldman sachs sukuk”, explains Germain Birgen.

“Assets held by Luxembourg domiciled regulated and unregulated investment structures are estimated at approximately usD 5 billion. One of the largest regulated islamic funds – sEDCO Capital global Funds- is managing in excess of usD 1.6 billion in a Luxembourg specialised investment Fund (siF) since 2012.”

forecasts for 2015

2015 is likely to see the opening of the first islamic bank in luxembourg.

Marco lichtfous, partner at Deloitte luxembourg is the main advisor handling the bank’s application file.

“the application of Eurisbank is currently with the CssF, Luxembourg’s supervisory Authority, and in the final approval stage”, he says.

Eurisbank will have its headquarters in luxembourg and will be the first shariah compliant bank in continental Europe.

“the bank will serve an untapped customer base of more than 20 million muslims. Conventional banks do not always appropriately address their needs. Eurisbank will supply much needed products and services”, explains Marco lichtfous.

marco LIcHTFOUS

partner,

Deloitte luxembourg

“The application of Eurisbank is currently with the CSSF,

luxembourg’s Supervisory Authority, and in the final approval stage.”


“the second market that the bank is trying to attract are ethical investors. After the financial crisis, these clients have been disillusioned with traditional banking practices and are seeking more ethically sound banks.”

The bank will start off as a private bank. At a later stage, the bank might add a commercial arm and engage in retail banking, while branching out in other countries such as the Netherlands, Germany, France and Belgium.

“there is still a lot of room for others to come in. Competition is good as it drives innovation and choice for the customers. We hope that others will follow suit. Europe is an attractive and promising market and Luxembourg is best placed to serve it. Also, for corporate customers, we are missing an islamic bank that can make the local connections in Europe and help investors to diversify”, concludes Marco lichtfous.

Takaful: life insurance for highlY moBile chamPions

According to EY, the global takaful market is estimated to continue its double-digit growth momentum of about 14% in 2014. By 2017, the global industry may reach over USD 20 billion.

luxembourg was the destination of the first European shariah compliant insurance company in 1983. takaful products took a long time to gain traction but are now growing in line with the market.

Today, luxembourg takaful products are being sold cross border into Germany and France, linked to a range of investment funds and asset management tools.

At the end of 2013, Vitis life introduced its first shariah compliant product for the French market, in cooperation with the independent islamic Finance Committee in Europe (CiFiE).

“the takaful products are of interest to ethical investors and to wealthy muslim clientele. they answer to the needs of highly mobile clients like athletes or top executives. the advantages of a takaful life insurance contract subscribed in Luxembourg is its portability associated with the high level of international expertise of Luxembourg life insurance companies”, concludes Nicolas limbourg, CEo of Vitis life. LR

nicolas LIMBOURG

CEo,

Vitis life

“Takaful is expected to grow as life insurance in the next few years,

but will depend on the demand for islamic finance products throughout

Europe. We are nonetheless very confident with regard to the

positive forecasts.”


luxembourg has made considerable efforts to adapt its legal and tax system to enable investors from the Middle East to manage their

international real estate investments.

lFF spoke with patrick Casters, Head of Wealth Management

international at Bil. The bank has just opened its first branch in Dubai.

INTERNATIONAL REAL ESTATE INvESTMENTS: ON SOLID GROUND IN

LUXEMBOURG

LFF: What tYPe of clients are usuallY interested in real estate?

pc: With the low interest rate environment, international investors are increasing their real estate investments. institutional, HNWi and UHNWi investors are the main drivers of the demand, with major interest in residential and commercial assets. Given the international expertise available in luxembourg, we are often contacted to handle structuring and financing needs in various European jurisdictions.

LFF: Which countries are most attractive to middle eastern real estate investors?

pc: Middle Eastern investors still favour European and US assets as an alternative to local GCC investments. london (particularly Mayfair, Belgrave, Knightsbridge, etc.) and paris (the famous “triangle d’or”) have been the most popular spots for real estate investments over the past decade, mainly in residential, but also in commercial assets. We also see growing interest in real estate assets in countries like Germany and Switzerland, as well as distressed opportunities in strategic spots in Southern Europe.

in the near future, we are also expecting increased diversification towards investments in other geographical zones, such as Asia and Africa, which are favoured for their high growth potential.

| iNtErNAtiONAL rEAL EstAtE iNvEstmENts: ON sOLiD grOuND iN LuxEmBOurglUxEMBoURG


LFF: What kind of Buildings can Be included in a shariah-comPliant real estate fund?

pc: Shariah-compliant funds must respect several rules: investing only in shariah-compliant companies, appointing a shariah board, carrying out an annual shariah audit and purifying certain types of income, such as interest, by donating them to a charity. offices, residential and industrial buildings respecting shariah rules constitute the majority of the investments.

LFF: is the islamic real estate fund market groWing?

pc: This market will definitely grow. Just to cite some figures, the GCC countries represent a market of around 50 million residents, with a combined GDp estimated in 2013 of about USD 1.6 trillion. if we include Muslims living outside the GCC countries and combine that with an increasing number of worldwide real estate opportunities, then the potential is enormous. luxembourg’s capabilities in international finance and the continuous development of our range of regulated products and services are major assets making it possible to position luxembourg as a hub for real estate investments in Europe and abroad.

LuxembourgforFinance

real estate has alWaYs Been the Basic holding of the "average euroPean uPPer-class familY". is this also the case in the middle east?

Patrick cASTERSTangible assets are and will remain an

important part of Middle Eastern families’ investment strategies. There is no doubt

that real estate will remain one of the most important asset classes for Middle Eastern

investors, just as for European (U)HNWis. LR


Patrick cASTERS

Head of Wealth Management international,

Bil

Hedging itself against a range of threats, going from market to

operational risks, Gulf investment Corporation (GiC), Kuwait based and GCC owned institution, has

chosen the luxembourg company EBRC (European Business Reliance

Centre) as its outer-regional Disaster Recovery site. EBRC is the only

company in the world operating three Uptime institute certified

Tier iV data centres.

lFF talked with Shawki Khalaf, Senior Vice president, Head of

operations Division and Global Markets Support Area at GlC-

Kuwait, until late 2014 and Jerry probst, international Business

Development Manager at EBRC about the factors that make

luxembourg an international recovery business centre.

LUXEMBOURG’S DISASTER REcOvERy

SOLUTIONS

The financial institution GiC has been the first development investor formed with the aim to foster economic growth, diversification and capital markets development across the GCC region. it has been an innovator through its development of GCC financial markets, including the introduction of the first GCC stock and bond mutual funds.

Currently owning two Disaster Recovery sites in the Gulf region, Kuwait as a local site and Bahrain as a regional branch office, GiC soon considered the opening of a third disaster recovery site outside the Middle East as a necessity.

“With the so-called Arab spring, the potential risks have become applicable to all countries in the middle East. the whole purpose of the Disaster recovery site was to enable giC to function in a peaceful and secured environment, which was perceived as impossible in the middle East”, points out Shawki Khalaf.

After considering several countries, among which Germany and the UK, luxembourg soon became the best option answering the team’s criteria.

| LuxEmBOurg’s DisAstEr rECOvErY sOLutiONslUxEMBoURG


“Luxembourg came as a viable option during our assessment because of its regulator’s reactivity, its state-of-the-art infrastructure, its financial centre’s international reputation in domiciliation and administration of uCits funds and the support it received by clients. so, all those elements produced in the end a positive picture of Luxembourg”, says Khalaf.

“i also believe that we sensed the level of expertise of Luxembourg as an international financial centre. We visited Frankfurt and some other financial centres, and we observed that many of these places used Luxembourg as a regulator for their funds”, he adds.

state-of-the-art-infrastructure

After choosing luxembourg as the location for their Disaster Recovery Solution, GiC identified EBRC, a luxembourg-based specialist in business continuity, as the operator of the project. With an experience of more than 1000 disaster recovery tests carried out over the last years, the company offers services ranging from data protection to shared management of iT platforms and operates via three Tier iV certified Data Centres with spaces where its clients can immediately resume their activities in the event of a “catastrophe” scenario.

“the main challenge is to guarantee local clients they will be served within two hours, even in case of a nationwide disaster. When it comes to international clients, each company brings its own challenges such as travel times, transportation, visas and accommodation for the employees”, explains Jerry probst.

Benefiting from the pSF (Financial Sector industry professional) status, EBRC meets the requirements of the financial centre regulator, the CSSF, and is therefore allowed to operate iCT services for banks, financial institutions and investment fund companies. To fully serve their banking clients, the company is also equipped with trading rooms to ensure the continuity of their trading activities.

“the government support to all institutions working to make Luxembourg an international Dr site, the use of EBrC by some of the key European institutions and the fact that it was a tier iv endorsed institution were obvious criteria to choose Luxembourg”, points out Khalaf.

Totalising 40% of Tier-iV data centres in Europe, the highest security specification, luxembourg boasts one of the highest data centre densities in the world and one of the most modern data centre parks in Europe with low latency connections to all of the major European internet hubs and a focus on green energy sources. These elements combined with luxembourg’s reputation in data protection and culture of trust forms the perfect combination with which to attract financial institutions to locate their Business Recovery site in luxembourg.

“Luxembourg’s strong reputation for service availability and high-level connectivity make it a European leader in iCt services and is well-positioned

Jerry pROBST

international Business Manager,

EBRC

"luxembourg's strong reputation for service availability and

high-level connectivity make it a European leader in iCT services and is well-positioned to serve as

a leading international Disaster Recovery site."


to serve as a leading international Disaster recovery site. Luxembourg responds to issues and stakes related to the hosting and to the management of sensitive information and is increasingly seen as an international centre to mitigate risks. Being well insulated from natural disaster such as flooding and earthquakes and as a member of the Eu and schengen zone, Luxembourg offers serenity for business continuity strategies”, says probst.

Bright future

“We are now moving to the live testing phase of the project to see the functioning of the business activities. it includes carrying out actual deals of treasury money markets with live transactions and fund transfers carried out of Luxembourg and the testing between the sWiFt payments and the mainframe computer. in other words, if an emergency develops unexpectedly, giC can function smoothly out of Luxembourg. Everything is in line with our expectation and i am persuaded that the decision that we made represents our vision", says Khalaf.

Today, banks, financial institutions and investment funds are still the main users of Business Continuity services, but other businesses in other sensitive sectors are following.

“in terms of technology, virtual Desktop infrastructure (vDi) and Cloud Computing will play a major role in the future of Business Continuity services. Anticipating that evolution, EBrC created in early 2011 "trustedCloupEurope", a reliable Cloud solution to give clients a readable offer in terms of governance, risk mitigation and compliance. With that service, Luxembourg is already well prepared for that evolution”, concludes probst. OB

Class of 2013/14 singapore

shawki kHALAF

Former Senior Vice president, Head of operations Division and Global

Markets Support Area (GlC-Kuwait)


Modern boards are becoming increasingly diverse in their composition and business perspectives. For companies operating from luxembourg, the large majority of which have a cross-border mandate, directors and supervisory board members must rapidly gain an understanding of unfamiliar corporate governance systems, regulations, and best practice as Chèvremont explains.

“Luxembourg has highly skilled professionals, notably in the financial sector and in the funds industry, who are aware of the importance of good governance in creating a competitive advantage for Luxembourg. in this respect, the iLA promotes best practice in the field of Corporate governance, by providing these professionals with high quality training, research and publications of direct relevance to their work.”

For this reason, ilA has forged a close relationship with the leading European business school iNSEAD (near paris) and the University of luxembourg.

“We have collaborated with iNsEAD and developed an international Directors programme. We also offer training for directors on governance issues with direct relevance to the sectors in which they are working. We have programmes for banks, for investment funds and for insurance companies, among others. For example, given increased international and national importance of compliance with Anti-money Laundering (‘AmL’) standards and regulations, we have developed a course focused upon specific obligations for fund directors."

tailored training and rigorous certification

The ilA, through the work of its sectorial working committees, provides its members with a wide range of specific tools and offers training

| FrAmiNg thE FuturE OF COrpOrAtE gOvErNANCElUxEMBoURG


lFF spoke with Marie-Jeanne Chèvremont - Chairman of the institut luxembourgeois des Administrateurs (ilA) to find out why luxembourg expertise is framing the future of corporate governance and raising standards worldwide.

Chèvremont's mission as ilA Chairman is to promote the profession of Directors in luxembourg by developing its members into highly qualified, effective and respected workforce. Founded in 2005, the institute, which will celebrate its 10 years anniversary in June, promotes best practice in the field of corporate governance and plays an important role at the European Union level, in conjunction with EcoDa, the European Confederation of Directors Associations, advising member state governments and EU institutions.

The focus on corporate governance has increased considerably since

the 2008 financial crisis, which was accompanied by significant regulatory changes around the

world. As the regulatory landscape continues to evolve, luxembourg

has focused on developing its robust oversight, strong investor

protection and world-leading expertise in corporate governance.

FRAMING THE FUTURE OF cORpORATE

GOvERNANcE

marie-Jeanne cHèvREMONTChairman,

iLA

tailored to the needs of directors, whichever sector they are involved in. For example, their Bank committee published the ilA Bank Directors' guide, a professional reference tool and offers training for directors of luxembourg credit institutions. Another ilA committee, is currently in the process of finalising the draft “ilA Director’s Guide for insurance and Reinsurance Companies”, which will undoubtedly become a reference for professionals of the sector. The insurance committee will also monitor the implementation of the Solvency 2 directive which will create a massive change for the insurance and reinsurance companies, including for their board members whose responsibilities will increase dramatically.

The ilA also offers a certification scheme for directors and awards an “ilA Certified Director” title. “Essentials luxembourg”, a programme run by the University of luxembourg covers the role and responsibility of directors and key duties in the major legal and regulatory features specific to the luxembourg business environment. Chèvremont explains:

“the programme is run over two and a half days. it offers the opportunity to discuss with both peers and experts the role and added value of a company director. upon completion of the programme, directors can be registered as a “Certified Director in Luxembourg”, but it is mandatory to continue train-ing and we monitor this closely“, points out Chèvremont. “i am confident this certification is very valuable to directors and raises trust and confidence from companies looking for independent directors to join their board.”

Proven track record

in January, the ilA investment Fund committee, in cooperation with pwC released an in-depth analysis of governance practices within asset management companies and investment funds domiciled in luxembourg. This 7th edition of the luxembourg Fund Governance Survey, found that transparency has greatly improved with survey respondents reporting increased disclosure of public information to investors about companies. John parkhouse, Chairman of this ilA committee and pwC luxembourg Deputy Managing partner explains:

“Corporate governance has long been a priority for the Luxembourg fund industry with a focus on robust oversight and investor protection. Once again, the high response rate to the researchers conducting the survey underscores the central role that governance plays in the Luxembourg fund industry.”

imPortance of oPen dialogue

luxembourg's small size enables all actors in the financial centre, including the regulator, the Commission de Surveillance du Secteur Financier (CSSF), to work cohesively to promote best practice and to ensure quick implementation of new rules on good governance.

“We really have a good working relationship with the CssF. We meet frequently with the regulator to explain the type of training, documents and FAQs we provide to our members. CssF officials share their concerns and tell us what they expect from company directors”, explains Chèvremont who holds a diverse portfolio of directorships herself.

marie-Jeanne cHèvREMONT

“Corporate governance has long been a priority for the

luxembourg fund industry with a focus on robust oversight and

investor protection."


the international dimension

“Luxembourg is a good place to locate because it is very international. here we have directors who are highly specialised in one sector but we also have directors who work across the field. For example, i am a director in a bank, a fund, a financial service provider and a non-profit organisation. i think that over time, Luxembourg has shown that it can understand and adapt to the different ways that companies are organised and managed. For example, if you take a us company, the board is expected to work for the shareholders, but if you take a European company, you have to look closely at the different stakeholders in the organisation. the first question we need to ask ourselves when we enter board is: to whom do we owe a duty?”

Accountability and legal responsibility existed long before the corporate governance concept was born. With over 40 years of experience, Chèvremont believes that more emphasis should be placed on understanding business practices, from strategy to audit, risk management and compliance - as opposed to just adopting additional regulation.

“most of the issues on which we focus today were already seen in Luxembourg’s traditional company laws. the problem is not so much the laws, but their application. globally if corporate boards and managers would apply the laws as they were intended – that is, not just by the letter, but by the spirit as well, then we would certainly have fewer issues in corporate governance.”

staYing one steP ahead

one global issue that has gained importance in the field of corporate governance and which the ilA has been working on is the question of limitation of mandates, notably through the entry into force of the CRD iV directive which provides for some restrictions as to the number of mandates a director may hold.

“We need to find the right balance in order for directors, on the one hand, to be able to dedicate sufficient time and expertise to each mandate and on the other hand, their legitimate aspiration to getting a diverse and satisfactory portfolio of directorships. At iLA we have published a brochure providing guidelines on accepting directorships, which include advice on the appropriate time and experience required to fulfil each directorship.”

Chèvremont points out that boardroom diversity, not only understood as gender diversity but also diversity in terms of personalities, expertise as well as educational and professional backgrounds is one of luxembourg’s unique selling points. Chèvremont needs to finish our interview in order to take a conference call. As the last word, she enthusiastically proclaims:

“Being a company board member ten years ago was something one did in one’s spare time. today’s board members need to permanently educate themselves. it is not just a hobby: it is a full time activity, which requires full commitment and professionalism!” GM


John pARkHOUSE

ilA Fund Committee Chairman,

pwC

“luxembourg is a good place to locate because it is very

international. Here we have directors who are highly

specialised in one sector but we also have directors who work

across the field."

marie-Jeanne cHèvREMONT

MAkING THE ENGINE ROAR

making the engine roar | p. 21

Drawing hundreds of millions of TV viewers, Formula one is ranked as the third most watched sport around the globe, after the olympics

and the FiFA World Cup. As a true pinnacle of motor racing,

Formula one has become a powerful symbol of excellence

attracting top worldwide drivers, technical teams and the support of international corporations employing the latest technology to gain a

competitive edge.

lFF talked to Gérard lopez, Chairman of the lotus F1 Team, one of the 10

teams competing in the F1 Championship, owned by luxembourg-based Genii

Capital.

“the first ever racing car i received, was when i was 3 years old and i vividly remember a black and gold Lotus. that was the start of it”, recalls Gérard lopez, Chairman of F1 lotus.

"i was actually a huge fan of Lotus when my childhood hero drove for them – Ayrton senna. When he then moved on and Lotus slowly disappeared i remained a senna fan and was very affected when he died. it was thus a great symbol when we bought the Enstone factory which was both the birthplace of the first ever senna car – the toleman and then became Lotus F1”, he adds.

hoW it all Began

Gérard lopez is used to mixing business with pleasure. With investments ranging from real estate to Charlie Chaplin, lopez could be called a serial entrepreneur. His first mediatised success came as founder of Mangrove Capital partners, when

the luxembourg-based Venture Capital company specialised in iCT rode on the internet boom by becoming the first investor in the now worldwide famous start-up Skype. later, Mangrove sold its shares for USD 3 billion and landed their first major investment.

in 2008, he co-founded luxembourg-based investment firm Genii Capital, specialised in new technologies, brand management and motorsport also known for its recent investment in New York’s Essex House or in the Charlie Chaplin museum based in the Hollywood star’s house and due to open its doors to the public in 2016.

Genii began its involvement in racing cars at the end of 2009 when the company acquired a majority share in the Renault F1 Team, now renamed lotus F1 Team, with the objective of bringing a long-term vision to the sport.

WorldWide sPotlight

With its two billion aficionados and 20 races per year, Formula one racing benefits from an extraordinary level of popularity which is hard to be found in any other sports. The worldwide stage given to Formula one serves as a powerful international networking tool while offering unique business-to-business opportunities in traditional and emerging countries.

“One of the reasons why we are attracted to Formula One is its global reach, most importantly its growth pattern. We don’t see growth in Formula One in Belgium or in France or any historic countries. We see growth right now in China, india, Brazil, obviously the us, but most importantly in the BriC-countries (Brazil, russia, india, China), our primary focus”, points out Gérard lopez.

Today, Formula one’s popularity is such that the aggregate turnover of the companies and sponsors financially involved in Formula one represent over USD 3.8 trillion. if the Formula one paddock were a country, it would be ranked as the fourth largest Gross Domestic product (GDp) in the world, ahead of Germany, France and the United Kingdom.

“it’s extraordinary what owning an F1 team does for networking. Everybody who is anybody wants to be invited into the paddocks. You can’t quantify the value of this network”, lopez says.

in this respect, Genii Business Exchange serves as a privileged business platform to transform the global exposure derived

from the Formula one World Champion-ship into business opportunities for a worldwide network of HNWis, opinion and business leaders.

As an active member of the Board of the lotus F1 team, lopez is personally involved in the daily running of activities from managing some of the operations of the team to guiding the general direction of the squad.

“We are very hands on investors. i currently work with the team for at least one day each month but in the past i was more hands on. in the beginning, i would be present every week to ensure we met our targets”, he says.

the luxemBourg dimension

luxembourg-born Spaniard Gerard lopez is today one of the most internationally known asset managers in luxembourg. His studies at Miami University introduced him to entrepreneurship where he started running a couple of businesses while still a student. Attracted by luxembourg’s dynamism and entrepreneurial feel, he however soon came back to his home country to fully benefit from its potential.

As a hub for private Equity funds, luxembourg plays an important role in the entrepreneur’s activities. “Luxembourg is still very much the hub for a large number of our activities including obviously mangrove where i remain an important shareholder and founder. For genii it is very similar, while one of the big sectors of focus now, oil and gas are being run out of the middle East for natural reasons”, points out lopez.

Formula one is however to be differentiated from typical private Equity investment.

“the challenge is the inequality of money distribution in the sport with the high intensity competition on track, two opposites that don’t attract. We are working with others to bridge that gap”, explains lopez.

While lotus is supported by partners and shareholders, it only represents 10 per cent of Genii’s global activities.

Addressing the specificities of the sport, lopez explains that business opportunities lie rarely in profitability out of a team but rather in the extensive networking platform offered thanks to its worldwide popularity.

“Clearly the last 3rd party capital increase valued the company at gBp 200 m which is a very good return, but it is what we have accomplished in and around F1 over the last 5 years that is key and valuable, all the deal flow, deals and relationships”, he adds.

The challenges that Formula one is facing force the sport and its players to bring new innovative ideas to the table.

one thing is certain. The lotus team, who just provided a first glimpse of their 2015 new racing car, is keen on winning.

Talking about the future of lotus in the months to come, lopez says: ”We have big plans and ambitions for next year. We wouldn’t be in this business if we weren’t out to win.” OB

making the engine roar | p. 22

gérard LOpEzChairman of Lotus F1 team and founding partner of genii Capital

“one of the reasons why we are attracted to Formula one is

its global reach, most importantly its growth pattern.”

impressumeditor: luxembourg for finance • 12, rue erasme • P.o. Box 904 • l-2019 luxembourg • tel. (+352) 27 20 21 1 • fax (+352) 27 20 21 399 • email [email protected] • www.luxembourgforfinance.comresponsible for publication: nicolas mackel. editorial team: ophélie Binet (oB), gilly mathieson (gm), lynn robbroeckx (lr). circulation: 5,500 – quarterly. Photos: all rights reserved

DIARyfinancial mission to canada

12-15 ApRIL 2015

luxembourg for Finance will organise its first Financial Mission to Canada in April 2015. The mission will be led by HE pierre Gramegna, Minister of Finance.

Valuable insights into various aspects of luxembourg's financial centre will be given at lFF events in Toronto (Monday, 13 April 2015) and Montreal (Wednesday, 15 April 2015), two economic hotspots in Canada.

Be part of our delegation showcasing the expertise luxembourg's financial centre has to offer.

financial mission to stockholm

4 MAy 2015

luxembourg for Finance will head again to Stockholm with a financial delegation, led by HE pierre Gramegna, Minister of Finance.

Join our financial seminar in Stockholm on Monday 4 May 2015 and the different panels promoting various aspects of the financial centre from wealth management to the fund industry.

ict sPring euroPe

19-20 MAy 2015

luxembourg for Finance will be present at iCT Spring Europe 2015, a two-day event showcasing the latest iCT technologies and FinTech solutions available on the market.

Come and visit our booth and get an insight into the latest trends in iT and finance and learn more about luxembourg's expertise in the FinTech sector along with state of the art infrastructure and data centres.

luxemBourg renminBi forum 2015

3 JUNE 2015

The second edition of the luxembourg Renminbi Forum organised by luxembourg for Finance will be held on 3 June 2015 at the philharmonie in luxembourg. The full day conference will bring together a European audience of high-level practitioners, major political figures, and key decision-makers for a full-day to share their views on the latest developments on the internationalisation of the Chinese currency.

Discussions will analyse where China's economy is heading as well as the latest developments in China’s financial reforms. panels will also focus on RMB products, notably fixed-income and investment funds.

uPcoming lff events

By scanning the QR code below, view the full events programme.

MUDAM LUXEMBOURG07.03.2015 – 31.05.2015

DAVIDALTMEJD

FLUX

Exhibition view at Mudam Luxembourg David Altmejd, The Doctor, 2007

Vanhaerents Art Collection, Brussels © David Altmejd. Photo: Rémi Villaggi

Exhibition organised in collaboration with: Musée d’Art moderne de la Ville de Paris

Musée d’art contemporain de Montréal

In partnership with:Embassy of Canada in Luxembourg

Mudam Luxembourg

2015_02_Pub_LFF_Altmejd.indd 2 2/12/15 2:25 PM

luxembourg, your european hub

Documents