Luxembourg Banking

Luxembourg banking has served as an example to many other countries that have sought to expand their banking industries and financial services.  Banking in Luxembourg is one of the main financial...

Luxembourg Banks

In late 2008 Luxembourg banks totaled 152, comprising credit institutions from more than 20 nations. From the total number of banks that operate in Luxembourg nearly 30 percent of these come from nations that are not part of the European Union.

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The number of banks in Luxembourg and the services that Luxembourg banks offer continue to increase regardless the challenges posed by the current liquidity crisis and economic crisis worldwide. Between the period 2006 and 2008 the assets accumulated by Luxembourg banks increased by 16%, amounting to approximately EUR 1,002 billion 2008 according to recorded statistics. Most banks in Luxembourg operate as both local and offshore Luxembourg banks. Currently, there are roughly 220 offshore banks in Luxembourg. Their assets have continued to grow, amounting to about UER 600 billion. This exponential growth of Luxembourg banking sector makes Luxembourg one of most significant banking centres in both the world and Europe. Two other places that rival Luxembourg banking are Switzerland and the United Kingdom (London in particular).

Luxembourg offshore banking is of valuable benefit to nonresident since Luxembourg is generally considered a high tax country. For the nonresident, Luxembourg banking means banking in Luxembourg free from taxes. Residents of the European Union are required however to be very cautious since the introduction of the EU Savings Tax Directive which requires for fellow EU countries to choose to either report the account information of EU residents with bank accounts in Luxembourg or to apply a withholding tax of 15% on interest earned on accounts, just as is required for any other EU country. Before going to a Luxembourg bank as a non resident therefore, EU residents must find out all information that is relevant to taxation and information sharing between Luxembourg banks and other EU tax authorities.

The alternative to holding accounts in Luxembourg by people who do not live in the EU or may live elsewhere but are citizens or may have national status is to bank offshore in a non EU country. This relieves the burden of having to pay taxes on offshore bank account interest and ensuring a relatively high degree of confidentially, which in Luxembourg banks have been ‘compromised’ as far as the EU tax Savings Directive is concerned. The Directive was signed in 2005.

Luxembourg banks generally offer services in English, French and German which are widely spoken. The main language for business is however French but the multilingual feature of Luxembourg’s society makes Luxembourg bank services accessible to a diverse range of people and corporations. websites owned by Luxembourg banks as well as customer service are this available in various languages to accommodate clients from many different parts of the world that deal with banks in Luxembourg.

Several Luxembourg banks are established as subsidiaries and branches of major foreign banks. Luxembourg banking is under the supervision of the Commission de Surveillance du Secteur Financier. Luxembourg banks can take the form of either a Universal Bank or a Mortgage Bond Bank. The first type of Luxembourg bank is licensed to conduct all types of banking transactions, whereas the bond issuing banks in Luxembourg are authorized to only issue covered bonds.

Luxembourg banks provide diverse services in areas such as corporate finance, capital markets and private banking. The Law of 5 April 1993 on the Financial Sector is the main piece of legislation for the formation of Luxembourg banks.

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