Financial Crime World

A History of Prudential Control and Supervision in Luxembourg’s Financial Centre

From 1945 to 2022, Luxembourg’s financial centre has undergone significant transformations, shaped by key milestones, events, and developments that have strengthened its regulatory framework. This article provides an overview of the major steps taken to ensure the stability of the financial system.

Early Years: Establishing Foundations (1945-1960s)

  • Bretton-Woods Agreement (1945): The International Monetary Fund and the World Bank were established, laying the groundwork for international cooperation in finance.
  • Grand-ducal Decree (1945): The Commissaire au Contrôle des Banques was created to oversee banks and ensure their stability.

Internationalization and Supervision (1960s-1970s)

  • Eurobonds and Investment Funds (1960s-1970s): Luxembourg’s financial centre internationalized, with the establishment of Eurobonds and investment funds.
  • German Banks in Luxembourg (1967): Many German banks established themselves in Luxembourg, strengthening its position on the Euromarket.

Strengthening Supervision (1970s-1980s)

  • Basel Committee (1974): The Basel Committee was created to strengthen and stabilize the financial system.
  • European Contact Group (1977): A forum for banking supervisory authorities was established, promoting cooperation and information sharing.
  • European Banking Directive (1977-78): EU-wide banking supervision was introduced through the adoption of this directive.
  • Luxembourg Transposes First Banking Directive (1981): The country enhanced its supervisory authority’s position by transposing the first banking directive into national law.

Modernization and Cooperation (1990s-Present)

  • UCITS I Directive (1988): Luxembourg became the first country to transpose this directive into its national law, offering a “European passport” for investment funds.
  • Anti-money Laundering Directive (1991): The European Anti-money laundering Directive was adopted, and Luxembourg transposed it into national law in 1993.
  • CSSF Publishes History Book (2020): A book on the history of prudential control and supervision in Luxembourg was published by the CSSF.

The text highlights the importance of prudential control and supervision in maintaining the stability of the financial system. The Commission de Surveillance du Secteur Financier (CSSF) plays a crucial role in ensuring the integrity and independence of the supervisory function, contributing to Luxembourg’s position as a leading financial centre.