"PSF, 2013 Overview and outlook of a resilient sector" - 28/11/2013DOWNLOAD
The PSF sector has shown to be resilient, despite its decrease in numbers in 2012 for the first time since 2004. These are the results according to the latest annual report of Deloitte Luxembourg analysing the industry as well as its trends and challenges. While by the end of 2011, 322 PSF were registered in Luxembourg, slightly fewer (316) could be identified as at 31 December 2012. “This decrease in number can primarily be attributed to structural changes in the PSF landscape, such as liquidations, mergers/take-overs or the surrender of PSF status”, explains Stéphane Césari, audit partner and PSF industry leader at Deloitte Luxembourg. “Nevertheless, the situation is far from alarming. Not only has overall activity increased over the past year, with net incomes rising 3% in 2012 and expected to rise more than 5% in 2013, but also new licenses as well as an ever growing number of employees have contributed to the dynamics of the sector.”
With more than a thousand licenses in 2012, the number of licenses granted remains on the rise. ‘Corporate domiciliation agents’, ‘Professionals providing company formation and management services’ and ‘Client communication agents’ were among the most popular PSF, accounting for over a third of all licenses granted. The creation of new statuses confirms the lawmaker’s interest in further developing the PSF sector: Article 26-1: ‘Professional custodians of assets other than financial instruments’ allows PSF to act as custodians of AIFM funds, thus opening up a new source of revenue for the industry. In addition, through the creation of the Family Office status, the State now aims at establishing a new label in Luxembourg – successfully as around 200 new licenses already granted in 2013 suggest. The creation of another status under the law on electronic archives promises to be a new driver of growth for the sector in the future.
PSF are Luxembourg’s second-largest employers in the financial services industry. Between 2008 and 2012, employment in PSF rose by more than 8.2%, while employment in banks declined overall by almost 2.4% over the same period. According to the Deloitte report, PSF employ around 15,000 people, accounting for over 56% of direct banking jobs, a figure indicative of their importance in the economy of Luxembourg. “The banking sector is increasingly becoming reliant on external providers. Banking services are being outsourced in order for banks to provide a more specialised and fluid service to their clients. As a result, there is a direct relationship in terms of employment between the increase in PSF and decrease in the banking sector,” comments Raphaël Charlier, audit partner at Deloitte Luxembourg.
2012 was also a year of abundant regulatory changes, impacting each PSF category: Investment Firms, Specialised PSF (such as Corporate Domiciliation Agents or Family Offices) and Support PSF, which offer operational services.
CSSF Circular 12/552 redefined the principle of governance and risk management for Investment
Firms as they have to put in place a standard risk governance model. For the first time, Support PSF were required to implement CSSF Circular 12/544 addressing the optimisation of the supervision through a risk-based approach.
In addition to these circulars, further regulatory changes will challenge the industry: Investments Firms need to transpose themselves into a more transparent model due to the requirements of tax transparency, Support PSF have to find a way to expand and export their label internationally and Specialised PSF have to adapt to the AIFMD law introducing a lighter depositary regime. “We must stay confident in the face of these changes and see them as an opportunity to demonstrate our competencies. Transparency and stronger regulations can put these PSF players on the map serving as a reinforcement of their position and reputation within the financial marketplace.” states Frédéric Ribler, audit director at Deloitte Luxembourg.
The key highlights of this year’s study entitled ‘PSF, 2013 Overview and outlook of a resilient sector’ were presented on 26 November to more than 120 industry professionals during a Deloitte conference. The event was concluded by a round table consisting of Stéphanie Weisse, general manager of Aurea Finance Company, Johan Dejans, managing director of ATC Corporate Services (Luxembourg), and Thierry Seignert, President of the Support PSF Association and general director of IBM Services Financial Sector.
A complete version of the report and a short version summarising the highlights is available on the Deloitte Luxembourg website at http://www.deloitte.com/lu/brochure/psf-2013 and http://www.deloitte.com/lu/whitepaper/psf-2013 respectively.