Riding the Wave of Global Finance from the Heart of Europe

A country that has managed to reorient its financial industry to the sound of transparency and green finance, leaving the image of tax haven behind. This is Luxembourg, which today is one of the most important financial centers in Europe and a bridge between international markets. Not without facing difficulties and challenges for the future, says Andrea Prencipe, Bocconi alumnus, CEO of YT Investor Services, and Chairman of Satispay Europe, who has lived and worked in the country for over 25 years.

What features of Luxembourg's financial and regulatory system make the country particularly attractive to international investors today?

Certainly, political stability: a country where political parties aren't in constant conflict and alternation in power is a very soft process. This ensures that Luxembourg is one of the ten countries in the world still enjoying a triple-A rating on financial markets. And it also ensures there are no particular social tensions: as in the rest of Europe, we are discussing pension system reform, but everything is happening gradually, without conflicts or strikes. Furthermore, political stability is accompanied by regulatory stability. But beyond this, there are two other elements that make Luxembourg competitive in financial markets.

And they are?

The first is the international environment. A multilingual ecosystem in which Luxembourgers make up approximately 50% of the population and are particularly concentrated in the public sector. There are three official languages ​​in the country. This international environment has been developing since the 1960s, with the introduction of Eurobonds. Incidentally, the Eurobond market was launched thanks to the Italians: the first ever Eurobond was issued by Autostrade per l'Italia. All of this has favored and facilitated the development of investment funds.

And the second element?

The ability to strategically reorient itself. It's true that in the past, banking secrecy and favorable tax regimes contributed to the development of Luxembourg as a financial hub — so much so that even today some people still consider Luxembourg as a tax haven, although this hasn’t been true for many years. The country has been able to refocus its financial industry on other aspects, such as transparency, cross-border distribution of investment funds and sustainable finance. The Luxembourg Green Exchange is now the most important specialized platform globally for trading securities in sustainable finance.

Are there similarities with the development of other small states?

There are certainly similarities with Switzerland and Singapore — I'm thinking of political stability — or with Ireland and Malta, but there are also clear differences: Singapore's financial marketplace is more oriented toward Asian markets, while Luxembourg's is more global and, for example, Ireland has developed a stronger specialization in alternative funds and hedge funds. But perhaps Luxembourg's truly distinctive trait is its ability to build a true brand for itself as a financial center.

How important are technological innovation and fintech (thinking of your experience at Satispay) today in maintaining and strengthening Luxembourg's role as a competitive financial hub?

There's certainly a clear vision that the fintech world is extremely promising. Luxembourg therefore has a strong desire to present itself and make itself attractive as an international fintech hub (and the government, led by the Grand Duke, is actively promoting this abroad). However, despite these efforts, the results are still somewhat of a work in progress, especially for early-stage ventures, for which Berlin, London or Paris are more attractive ecosystems. Where Luxembourg becomes more interesting, however, is when it comes to scale-ups, viz. my experience with Satispay.

So, let's talk about your personal experience. When and how did you arrive in Luxembourg?

I arrived in 2000, and let's just say I didn't work in Italy for long. As it often happens, I said to myself, "Let's go abroad and gain experience, maybe just for a couple of years." I've stayed for 25 years. It's a recurring story among expats here. In those years in particular, the opportunities offered by a burgeoning financial center like Luxembourg were enormous. With the possibility of job changes and career advancements that in Italy unfortunately were foreclosed or came only after many years. The advantage of living in a small country, which has a population smaller than the province of Varese, is that it is always in need of new people. This, among other things, constitutes one of the challenges for Luxembourg's future.

What is it?

The challenge the country has always faced: attracting human capital. One of the major limits to Luxembourg's growth has been the difficulty to find talent for hire. Making itself increasingly attractive to international human capital will be crucial.