A N N U a L R E P O Rt 2 0 0 6 Annual Report 2006

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A N N U a L R E P O Rt 2 0 0 6 Annual Report 2006 2006 Annual Report CSSF 110, route d’Arlon L-2991 LUXEMBOURG Annual Report 2006 Commission de Surveillance du Secteur Financier 110, route d’Arlon L-2991 LUXEMBOURG Tel.: (+352) 26 251-1 Fax: (+352) 26 251-601 E-mail: [email protected] Website: http://www.cssf.lu Cut-off date: 1 March 2007. The reproduction of the annual report is authorised, provided the source is acknowledged. Design: metaph Printed by: Imprimerie Centrale s.a., Luxembourg PREFACE The year 2006 was an excellent year for the financial centre as a whole. Without wanting to be overenthusiastic, I deem it justified and appropriate to be optimistic as regards the future of our financial centre which, in my opinion, will continue to largely contribute to the prosperity of the national economy. The scepticism of the previous years must give way to confidence and I really encourage the youth to seek employment in the financial sector, which, more than ever, offers job opportunities for qualified experts. I am certain that the financial centre, which developed over years, stands on sound grounds. Luxembourg must be proud thereof and should not have false modesty in this regard. Over the last years, our financial centre was able to diversify by discovering and developing niche activities, thus giving it new impetus. No need, therefore, to fear for its future, even if some element was to change afterwards, notably due to decisions taken abroad. There is no “global risk” likely to shake our centre as a whole, because it is already diversified and because the products are diversified. I would like to list four conditions that I deem essential to ensure that the financial centre will be as successful in the coming years. Firstly, the financial centre must fulfil all the requirements discussed and decided at international level. There is no future for “unregulated islands”. Secondly, Luxembourg must more than ever take care of its financial centre, notably by supporting the creation of material infrastructures fostering its development and by adapting the legal and regulatory framework as needed. Thirdly, professional training of all sorts must be continually improved, as well-trained staff is essential to assure that our financial centre remains competitive and attractive in the medium and long term. Substantial progress has been made recently with the creation and development of the University of Luxembourg and the Luxembourg School of Finance, which are major steps towards a high level of training and which reflect that Luxembourg recognised the challenges it must take up in this field. Last but not least, the financial professionals must put the customers’ interests at the centre of their concerns, because satisfied customers are the foundations of the centre. Finally, I would also like to pay tribute to the CSSF’s employees, who, ever more numerous (278 as at 1 March 2007), regularly arouse positive responses from the entities subject to the supervision of our Commission, which demonstrates a sound interaction between the supervised and the supervisors. Jean-Nicolas SCHAUS Director General 3 TABLE OF CONTENTS Corporate governing bodies of the Commission de Surveillance du Secteur Financier 7 I SUPERVISION OF THE BANKING SECTOR 9 1. Developments in the banking sector in 2006 2. Prudential supervisory practice II SUPERVISION OF UNDERTAKINGS FOR COLLECTIVE INVESTMENT 41 1. Developments in the UCI sector in 2006 2. Newly created entities approved in 2006 3. Closed down entities in 2006 . Developments regarding UCIs investing principally in other UCIs 5. Developments regarding UCIs adopting alternative investment strategies 6. Developments regarding UCIs investing principally in real estate assets 7. Performance analysis of the major Luxembourg UCI categories in 2006 8. Management companies and self-managed investment companies 9. Developments in the regulatory framework 10. Prudential supervisory practice 11. Savings plans offered by Luxembourg UCIs III SUPERVISION OF PENSION FUNDS 93 1. Developments in the pension funds sector in 2006 2. Activity of existing pension funds 3. Developments in the legal framework . International co-operation IV SUPERVISORY FRAMEWORK FOR SICARS 97 1. Developments in the SICAR sector in 2006 2. Regulatory framework 3. Prudential practice V SUPERVISION OF SECURITISATION UNDERTAKINGS 105 1. Developments in the sector of authorised securitisation undertakings 2. Prudential supervisory practice VI SUPERVISION OF THE OTHER PROFESSIONALS OF THE FINANCIAL SECTOR 109 1. Developments in 2006 of the other professionals of the financial sector (PFS) 2. Prudential supervisory practice VII SUPERVISION OF SECURITIES MARKETS 131 1. Reporting of transactions on financial assets 2. Supervisory practice 3. Developments in the regulatory framework TABLE OF CONTENTS VIII SUPERVISION OF INFORMATION SYSTEMS 155 1. Activities in 2006 2. Supervisory practice IX MEANS OF SANCTION AVAILABLE TO THE CSSF 163 1. Means of intervention available to the CSSF 2. Sanctions imposed in 2006 X GENERAL SECRETARIAT 167 1. Activities in 2006 2. Customer complaints 3. Reports related to the fight against money laundering and terrorist financing XI GENERAL SUPERVISION AND CSSF INVOLVEMENT IN 179 INTERNATIONAL GROUPS 1. General Supervision 2. Co-operation within European institutions 3. Multilateral co-operation XII BANKING AND FINANCIAL LEGISLATION AND REGULATIONS 213 1. Directives under discussion at Council level 2. Directives adopted by the Council and the European Parliament but not yet implemented under national law 3. Laws passed in 2006 . Circulars issued in 2006 5. Circulars in force XIII INTERNAL ORGANISATION OF THE CSSF 229 1. Functioning of the CSSF 2. Human resources 3. Information Technology . Staff members 5. Internal committees APPENDICES 241 1. Comments on the general policy and interpretations of the CSSF in relation to the authorisation of professionals of the financial sector 2. The CSSF in figures 3. The financial centre in figures . Contact telephone numbers 5 EXECUTIVE BOARD Arthur PHILIPPE Jean-Nicolas SCHAUS Simone DELCOURT Director Director General Director 6 GOVERNING BODIES Corporate GOVERNING BODIES OF THE COMMISSION DE Surveillance du SECTEUR FINANCIER BOARD OF DIRECTORS Chairman Jean GUILL Treasury director, Ministry of Finance Vice-chairman Gaston REINESCH General administrator, Ministry of Finance Members Rafik FISCHER Member of the Board of Directors of the Association Luxembourgeoise des Fonds d’Investissement Jean FUCHS Chairman of the Association Luxembourgeoise des Professionnels du Patrimoine Jean MEYER Chairman of the Association des Banques et Banquiers, Luxembourg Etienne REUTER Premier Conseiller de Gouvernement, Ministry of Finance Claude WIRION Member of the Executive Committee of the Commissariat aux Assurances Secretary Danielle MANDER EXECUTIVE BOARD Director General Jean-Nicolas SCHAUS Directors Arthur PHILIPPE, Simone Delcourt 7 C H A P T E R 1 SUPERVISION OF THE BANKING SECTOR 1. Developments in the banking sector in 2006 2. Prudential supervisory practice Supervision of THE banKing sector 1. DEVELOPMENTS IN THE banKING sector IN 2006 1.1. Characteristics of the Luxembourg banking sector The Luxembourg banking legislation provides for three types of banking licences, namely licences governing the activities of universal banks (152 institutions had this status on 31 December 2006), those governing the activities of banks issuing mortgage bonds ( institutions had this status on 31 December 2006) and those governing the activities of banks issuing electronic means of payment (no institution had this status on 31 December 2006). The universal banks comprise three categories according to their legal status and geographical origin: - banks incorporated under Luxembourg law (11 on 31 December 2006); - branches of banks originating from a Member State of the European Union or assimilated (3 on 31 December 2006); - branches of banks originating from non-Member States of the European Union (8 on 31 December 2006). The caisses rurales (16 on 31 December 2006) and their central establishment, Banque Raiffeisen, which, according to the law on the financial sector, are to be considered as a single credit institution, constitute a special case. 1.2. Development in the number of credit institutions The downward trend in the number of credit institutions established in Luxembourg that has been observed for several years did not continue in 2006. With 156 authorised banks at the end of 2006, their number has even increased by one entity compared to 31 December 2005 (155). Among these 156 entities, 11 are banks incorporated under Luxembourg law (2005: 112) and 2 are branches (2005: 3). Development in the total number of banks established in Luxembourg Year Branches Subsidiaries Total 1988 2 119 13 1989 27 139 166 1990 31 16 177 1991 36 151 187 1992 62 151 213 250 1993 66 152 218 Branches Subsidiaries 199 70 152 222 1995 70 150 220 200 1996 70 151 221 1997 70 15 215 1998 69 10 209 150 1999 69 11 210 2000 63 139 202 100 2001 61 128 189 2002 55 122 177 50 2003 50 119 169 200 6 116 162 2005 3 112 155 0 1988 2006 2 11 156 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 10 CHAPTER I The following events have influenced the development in the number of credit institutions. - Four branches have ceased their activities, two banks went into liquidation and two banks have merged with other banks of the financial centre. - Over the same period, nine banks have been granted a licence. Eight banks were withdrawn from
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