Previous poor financial governance has led to increased regulation. Philipp von Restorff, CEO of Institut Luxembourgeois des Administrateurs, defends the need for Luxembourg adopting greater transparency and its heading down the path of a sound regulatory framework despite complaints about the cost and the risk of weakening the Duchy’s international competitiveness.
How does Luxembourg navigate the tension between restoring confidence from past poor governance and complaints about excessive regulation?
Governance issues remain in the news. On the one hand, we see big financial players, paying a price for earlier poor governance. On the other hand, we also hear complaints from financial service providers that excessive compliance is holding their business back. They are linked. Since the financial crisis, the regulatory framework has necessarily become more complex. That has meant that the speed of change is increasing, entailing huge operational costs that the organizations have to bear. But we can’t forget that Luxembourg is on the radar of the international regulators. The Duchy must be compliant and organizations cannot afford to have wrongdoings in this area.
Do you worry, that transparency and better governance will put Luxembourg out of business internationally?
Luxembourg had the political will to engage on a path of transparency and a sound regulatory framework. Some people fear that we are putting ourselves out of business internationally because the cost of compliance is too high. A sound regulatory framework comes with a price tag. No, I don’t fear that will put ourselves out of business. The costs are indeed rising and we must make sure we keep a level playing field. It’s interesting to hear about the international spotlight being on the country because Luxembourg came out well from its recent FATF evaluation. I think we have been moving in the right direction, and that we must continue to build on that success.
“A sound regulatory framework comes with a price tag”
