Luxembourg is in talks with a wide range of financial firms looking to relocate out of London as Britain leaves the European Union, but it will not offer sweeteners to undercut rival centers, Finance Minister Pierre Gramegna said on Thursday.
The firms include banks, asset managers, insurance companies and fintech companies, all of them keen to set up shop in the EU to maintain access to its single market and continue serving their European clients with as little disruption as possible.
“Luxembourg has not taken any special measures, and nor do we plan to,” Gramegna told reporters on the sidelines of the International Capital Markets Association conference in Luxembourg. “It doesn’t give the right signal. There are EU regulations that everyone must comply with.”
U.S. insurance giant AIG is the biggest group so far to pick Luxembourg as its EU base, prompting Ireland to complain to the European Commission that it is being undercut by rival centers competing to host financial firms leaving London.
London-based asset manager M&G Investments has also announced it plans to set up in Luxembourg, which is already a major asset management and financial services hub in Europe.
Gramegna said the talks with financial firms have been underway since Britain voted last June to leave the EU.
The preliminary contacts between Britain and the EU over Brexit and Prime Minister Theresa May’s surprise decision to hold a snap national election on June 8 have so far had little impact on the process.
No ‘Letter Box Entities’
Gramegna said firms would not be allowed to set up a subsidiary in Luxembourg simply by opening an office and employing a couple of members of staff, a view echoed by Steven Maijoor, chairman of the European Securities and Markets Authority (ESMA).
“Trying to find the best possible location is perfectly legitimate and understandable, but it should not be done on the basis of competition, regulatory and supervisory standards,” Maijoor told delegates at the conference.
“We need to avoid the development of any letter box entities. There cannot be an undermining of appropriate regulation and supervision by the EU 27,” he said.
Maijoor said ESMA would shortly publish four “opinions,” or formal guidance, on how national regulators should handle day-to-day supervision of relocated operations, in particular when certain functions are subject to outsourcing and delegation, a key issue for the funds sector.
Not everyone is looking to take business out of London, at least not yet.
Andreas Utermann, chief executive officer at Allianz Global Investors overseeing $480 billion of assets, said his firm’s London operation had grown in recent years, adding that he envisaged adding to the London headcount, not reducing it.
“For now, it’s business as usual,” he said.
(Reporting by Jamie McGeever; editing by Gareth Jones)
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