LUXEMBOURG
Luxembourg has one of the highest GDP per capita in the world. Luxembourg is a major financial hub and many European Union institutions are located there. The large current account surplus stems from the particular growth model of a country based on an efficient financial sector, which has weathered the 2008-2009 crisis well.
Risks to domestic financial stability due to the size of Luxembourg’s financial sector are mitigated by the fact that the sector is well capitalised, liquid, diversified and specialised. However, greater risk-taking and pending changes in global corporate taxation represent a downside risk. Another vulnerability stems from the fact that the healthy fiscal metrics (a public debt ratio limited to 25% of GDP) are highly dependent on the growth model. More recently, rising real estate prices and elevated household indebtedness have appeared on the radar screen.
The very small, very open economy of Luxembourg makes growth structurally more volatile than for larger economies. In 2019, real GDP grew by 2.3%, below the rate observed in recent years (3.6% on average per year since 2013), but still 1-ppt above the euro area average. At -1.3%, the contraction in GDP in 2020 is one of the least severe among the Eurozone countries.. The European Commission expects real GDP growth of 4.8% in 2021 and of 3.3% in 2022.
Summary
BNP Paribas BGL is a market leader in Luxembourg with 4,000 employees locally, a substantial business centre and direct market clearing access. BNP Paribas provides full service capabilities for retail and institutional customers across all major business lines, including cash management, trade finance and FX & interest rate hedging.
Currency
- Luxembourg uses the euro (EUR).
2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
Exchange rate EUR per USD | 0.9017 | 0.9040 | 0.8873 | 0.847 | 0.893 | 0.88 |
Source: IMF, International Financial Statistics, July 2021.
- Luxembourg's central bank is the Banque Centrale du Luxembourg (BCL – www.bcl.lu).
- The Banque Centrale du Luxembourg is a member of the European System of Central Banks (ESCB) and operates certain activities, such as issuing currency, under the authority of the European Central Bank (ECB – www.ecb.europa.eu).
Bank Supervision
- In November 2014, the ECB, via the Single Supervisory Mechanism (SSM), assumed responsibility for supervising the financial stability of banks operating within the euro zone. However, while the ECB has final supervisory authority over all banks operating within the euro zone, it will only directly supervise those banks classified as ‘significant’ under the terms of the SSM (115 significant banking groups have been recognized to date). ‘Less significant’ banks will continue to be supervised by the national supervisory authority, i.e. the Financial Sector Supervisory Authority (Commission de Surveillance du Secteur Financier (CSSF) – www.cssf.lu).
Bank accounts
- A company is generally considered resident in Luxembourg if its place of effective management or legally registered office is located there.
Within LUXEMBOURG | Outside LUXEMBOURG | |
Local Currency | Permitted without restriction, fully convertible |
Permitted without restriction, fully convertible |
Foreign Currency | Permitted without restriction, fully convertible |
Permitted without restriction, fully convertible |
Within LUXEMBOURG | Outside LUXEMBOURG | |
Local Currency | Permitted without restriction, fully convertible |
Permitted without restriction, fully convertible |
Foreign Currency | Permitted without restriction, fully convertible |
Not applicable |
- Lifting fees are applied on payments between resident and non-resident accounts.
Factoring
Luxembourg is serviced from Belgium.
Please consult the Belgian pages.
BNP Paribas Cash Management Capabilities
Cash collections | |
Cheque collections | |
Direct debit collections | |
Domestic incoming transfers | |
Virtual IBAN | |
Virtual accounts | |
International incoming transfers | |
Card acquiring |
Cash withdrawals | |
Cheque payments | |
Direct debit payments | |
Domestic outgoing transfers | |
Commercial cards | |
Virtual cards | |
International outgoing transfers | |
SWIFT gpi | |
Real-time international payments through BNP Paribas’ network | |
Card issuing |
Local e-Banking | |
Global e-Banking - Connexis | |
SWIFT/ host to host |
Payments & collections
Electronic credit transfers remain the most popular payment method for business-to-business payments, representing 99% of cashless payment values in Luxembourg. Card payments, using both credit and debit cards, are widely used by consumers for low-value payments. The use of other electronic payment channels is increasing, with both mobile and internet banking growing in popularity. The Digicash by Payconiq mobile wallet is used by over 25% of the population of Luxembourg.
Electronic banking services are available from all banks. Domestic companies primarily use MultiLine. MultiLine supports the EBICS (Electronic Banking Internet Communication Standard). Electronic invoicing is also available: Saferpay is an e-payment solution which enables secure online retail purchases and bill payments. Larger companies have access to SWIFT for Corporates.
All the country’s leading commercial banks provide online and mobile banking services. Online and mobile banking services are available and widely used.
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OPERATING HOURS |
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CLEARING CYCLE DETAILS (eg cut-off times) |
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SYSTEM HOLIDAYS |
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OPERATING HOURS |
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CLEARING CYCLE DETAILS (eg cut-off times) |
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- Credit transfers are used by companies to pay salaries and suppliers, and to make tax and treasury payments. They are also used to make benefit payments and interbank payments.
- SEPA credit transfers can be settled via STEP2 or correspondent banking networks.
- Approximately 66 banks in Luxembourg participate in the SEPA credit transfer scheme.
- Banque Raiffeisen’s incoming and outgoing domestic and cross-border SCTs are processed by the Netherlands-registered company, Equens SE.
- High-value and urgent EUR-denominated domestic and cross-border (within the euro zone) credit transfers can be settled in real time via TARGET2-LU.
- High-value and urgent cross-border credit transfers can also be settled with end-of-day value via the Euro Banking Association's EURO1 system. Seven banks in Luxembourg participate directly in EURO1.
- Cross-border transfers can be made via SWIFT and settled through correspondent banks abroad and/or bank branch networks.
- In November 2017, the European Payment Council’s SCT Inst scheme (a pan-European 24/7 instant payment scheme for SEPA credit transfers) went live across all SEPA countries. The scheme enables the transfer of funds (the maximum threshold value for SCT Insts is EUR 100,000, as of July 2020) to another account in less than ten seconds. There are seven SCT Inst participants in Luxembourg at present.
- EBA Clearing and Italy’s SIA Group have developed and implemented a pan-European platform for instant EUR payments called RT1. It is fully compliant with the SCT Insts scheme and is in line with the ISO 20022 global messaging standards for instant payments.
- TIPS is a pan-European service for the settlement of instant payments in central bank money. The service enables payment service providers and ACHs with access to TARGET2 to offer fund transfers 24/7, 365 days a year. TIPS is aligned with SCT Insts. It is primarily focused on EUR payments but is technically capable of settling payments denominated in other currencies.
- Direct debits are used for regular payments, such as utility bills.
- SEPA CORE and B2B direct debit schemes can be settled on a same-day basis via STEP2. There are 30 Core SDD participants and 19 B2B SDD.
- Cross-border SEPA direct debits can be processed via STEP2 or Switzerland’s SIX Payment Services (which works together with the Swiss Euro Clearing Bank (SECB)).
- Cheques are rarely used in Luxembourg.
- Cheques are cleared and settled bilaterally between banks.
- Card payments are increasingly popular, especially for retail transactions.
- There were 1 million debit cards and 2.0 million credit cards in circulation at the end of 2019.
- Visa and MasterCard-branded payment cards are the most widely issued.
- American Express and Diners Club credit cards are also available.
- Card payments are settled via Switzerland’s SIX.
- Contactless card technology is available in Luxembourg.
- There were 595 ATMs in Luxembourg at the end of 2019.
- There were 16,740 EFTPOS terminals in Luxembourg at the end of 2019.
- All payments are settled via SIX.
- All ATMs and POS terminals are EMV-compliant.
- Paysafecard is an online pre-paid payment method. The paysafecard is credited using paysafecard PINs and is not linked to bank accounts. Customers can combine paysafecard PINs with an online account.
- The Digicash mobile payment app is offered by Luxembourg’s leading banks and used by over 25% of the population.
Short term investments
Interest payable on credit balances
- Interest-bearing current accounts are permitted for residents and non-residents.
Demand deposits
- Interest-bearing demand deposits are permitted for residents and non-residents.
Time deposits
- Time deposits are available in EUR or major foreign currencies with terms ranging from one week to one year.
Certificates of deposit
- Domestic banks issue certificates of deposit with terms ranging from overnight to 12 months.
Treasury (government) bills
- Luxembourg's government does not issue Treasury bills.
- Domestic commercial paper is issued by companies and public authorities with terms ranging from overnight to 12 months.
Money market funds
- Domestic money market funds, SICAVs (société d’investissement à capital variable), are popular short-term investment instruments.
- SICAVs are open-ended investment funds.
Repurchase agreements
- Repurchase agreements are commonly available in Luxembourg.
Banker's acceptances
- Banker's acceptances are not used in Luxembourg.
BNP Paribas Trade Finance Capabilities
Documentary credits | |
Documentary collections |
Bank guarantees | |
Standby letters of credit |
Receivables | |
Payables | |
Inventory |
Connexis Trade | |
Connexis Supply Chain | |
SWIFTNet Trade for Corporates | |
Connexis Connect | |
Connexis Guarantee | |
SWIFTnet Supply Chain |
- BNP Paribas BGL's Global Trade Solutions (GTS) team comprises a local trade manager supported by a middle office team of 10 trade finance experts. In addition to the bank's integrated export and import offering (e.g. documentary credits, collections and international guarantees) supported by the bank's global processing platforms, GTS also provides corporate clients with innovative supply chain management solutions.
International trade
- As a member of the EU, Luxembourg follows the EU customs code and applies all associated regulations and commercial policies.
- Trade with other countries in the European Economic Area (EEA) and Switzerland is exempt from tariffs and other controls.
- The EU has trade agreements in place with over 30 countries.
- The EU is currently in free trade negotiations with a number of countries, including the Association of Southeast Asian Nations (ASEAN), Australia, Indonesia, Mercosur (the Southern Common Market), Uruguay and the USA.
- The EU-UK Trade and Cooperation Agreement came into force on 1 May 2021.
Imports | Commercial aircraft
| Cars | Refined oil | Scrap iron | Broadcasting equipment |
Primary Import sources | Belgium (27%) | Germany (24%) | France (11%) | Netherlands (5%) | |
Exports | Broadcasting equipment | Iron and iron products | Cars | Clothing and apparel | |
Export markets | Germany (23%) | France (13%) | Belgium (12%) | Netherlands (6%) | Italy (5%) |
2016 | 2017 | 2018 | 2019 | 2020 | ||
Exports | - goods USD m | 19,742 | 21,845 | 23,472 | 23,017 | 26,280 |
- services USD m | 97,872 | 104,626 | 112,639 | 110,578 | 110,806 | |
Imports | - goods USD m | 22,030 | 23,772 | 25,555 | 24,251 | 23,502 |
- services USD m | 74,641 | 79,252 | 84,723 | 84,040 | 86,599 | |
Current account as % GDP | 5.1 | 5.2 | 4.7 | 4.3 | 4.1 |
Source: IMF, International Financial Statistics, July 2021.