SPRING IS BETTER LATE THAN NEVER
There is a new spring in the step of Luxembourg's bankers these days, and so there should be. After last year's worries about German banks heading back to Frankfurt and the dwindling of the bed-rock Eurocredit business, the Institut Monetaire Luxembourgeois (IML) reported that pre-tax banking profits in 1985 rose by an average of more than 20%. What makes Luxembourg bankers even happier is that the true profits were actually much greater -- over three times as much -- but they were hidden from taxation under Luxembourg's generous regulations.
Turning in a good performance has given a new status to Luxembourg's 106 foreign banks. The Luxembourg branch of a banking multinational has always been little more than a booking centre and paying agent, a place where a lot of business was conducted on paper but very little actually done.
Now all this is changing. The Luxembourg authorities have realized that for the Financial centre to survive it must diversify. This active encouragement of diversification has coincided with the securitization boom, which in turn has meant that major houses have had to build up their placement power. Retail investors like Luxembourg -- there are no fixed commissions, no stamp duty or withholding tax and the rules governing banking secrecy have been tightened.