News - 19.05.2021

Luxembourg Financial Services Industry Survey: Cautious optimism despite numerous challenges

  • The Financial Centre
  • Increased optimism about the resilience of the global financial services industry
  • Climate change, geopolitical tensions and economic uncertainty top three global risks
  • Financial leaders confident in adapting to EU sustainable finance rules
  • Access to talent a top operational challenge
  • General concern about consequences of digital disruption

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50% of the 350 c-suite executives and senior managers from Luxembourg’s financial centre surveyed by Luxembourg for Finance in April 2021, believe the global financial services industry to be resilient in the medium term. This represents an increase of 7% compared to October 2020. Only 24% still see the market environment becoming more volatile and 23% expect major risks and disruptions ahead.

Navigating the risks associated with geopolitics, economic uncertainty and climate change are the primary concerns of the senior leaders in the financial services industry over the next 12-24 months. Covid-related bankruptcies are seen as a less pressing risk, having been priced in to a large degree.

The crisis also seems to have an impact on the operational side of business. 23% of respondents think that office space will shrink after the crisis. Only 8% think that it will increase. There are nuances when it comes to recruitment. 35% of the respondents see a strengthening in the front office area in Luxembourg. While 8% and 16%, respectively, see a reduction of the workforce in the middle and back-office areas. Confidence in the ability of one’s own organisation to deal with operational challenges is generally high, however, 44% of the respondents are “not confident at all” or “not really confident” in their organisation’s ability in attracting and retaining talent.

Climate change emerged as a leading concern with 60% revealing some level of concern about their organisation’s ability to deal with climate change. Underlining the industry’s commitment in this area, 81% are confident about their organisation’s ability to handle changes related to sustainable finance regulation emerging from Brussels over the next 2-5 years. This confidence among decision makers in dealing with the changing regulatory landscape for sustainable finance is underpinned by the significant investment they plan to make in upskilling employees: 84% said they expect to provide sustainable finance training over the next 2-5 years, with 38% expecting to “significantly upskill” their workforce. Of the various financial sectors covered in the survey, banks appear most committed to rolling out sustainable finance training.

The survey revealed far less confidence around the issue of digital disruption in the financial industry. 69% of leaders revealed “moderate”, “strong” or “extreme” concern about a possible shift from e-commerce platforms towards becoming distributors of financial products in the next 2-5 years. Over half of respondents, 57%, did not believe regulation was keeping pace with the increasing digitalisation trends across the financial services sector.

Nicolas Mackel, CEO of Luxembourg for Finance, said: “While the financial industry still faces numerous uncertainties and challenges, cautious optimism can be perceived and this is very encouraging.

Financial services can be a tremendous force for good as the world recovers from the pandemic and attempts to build back better. So the commitment financial leaders show towards meeting their sustainable finance obligations, such as training their staff, will make a huge difference in how economies and societies function in the future.”