In its statement, the ULC condemned banks for what it deemed as prioritising profit over client services, demanding increased transparency regarding fees, fair loan terms, and improved accessibility to local branches and ATMs.
Responding to these allegations, the Luxembourg Bankers’ Association (ABBL) expressed its discontent, rejecting what it perceives as a “populist” approach by the ULC. ABBL Director Jerry Grbic voiced his frustration with the tone of the ULC’s criticism, highlighting what he sees as a lack of fundamental financial understanding:
“The press release carries a populist undertone, which I find concerning and lacks basic financial insights.”
While acknowledging the recorded record profits, Grbic contextualised the situation, attributing it to a unique set of circumstances where interest rates experienced significant fluctuations:
“These record profits occurred in a specific context where interest rates surged rapidly. As a result, banks, unable to lend out all their liquidity, had to deposit it, initially at negative interest rates. However, with subsequent interest rate increases, they now receive positive returns. This shift from incurring costs to generating income has substantially contributed to the surge in interest earnings,” Grbic elaborated.
Grbic described this situation as “exceptional and temporary.”
Comparing Luxembourg to neighbouring countries, Grbic highlighted the nation’s favourable ATM-to-population ratio. With 80 ATMs per 100,000 inhabitants, Luxembourg surpasses France (70) and outstrips Germany and Belgium (less than 60). Grbic attributed the decrease in bank branches to lower demand.
As the banking sector undergoes a transitional phase, Grbic emphasised the declining significance of cash transactions, which now account for less than 40% of payments. He asserted Luxembourg’s pioneering role in embracing online banking.
Regarding transparency in banking fees, Grbic contended that stringent regulations ensure clarity. Since the implementation of an EU directive in 2014, which was transposed into national law in 2017, banks are mandated to disclose their rates transparently.
According to ABBL, clients can access this information online or in print upon request. Not aligning lending conditions with the European base rate would be “difficult” for Luxembourg’s banks, Grbic argued, citing potential repercussions on savings accounts interest rates.
On a different note, the ABBL confirmed that interest rates on housing loans have begun to decline.
