"The Great Euro Bank Robbery" - Hands off our finance sector, Luxembourg warns

"The Great Euro Bank Robbery" - Hands off our finance sector, Luxembourg warns.(HD).

Luxembourg railed on Wednesday against what it fears is a new eurozone position that oversized finance sectors must be scaled back in line with national economic output following the Cyprus banking debacle.

Former Eurogroup chairman Jean-Claude Juncker's government is "concerned about recent statements and declarations that were made since the crisis in Cyprus sharpened", a news release said.

Specifically, it rejects "general assessments of the size of the financial sector in relation to a country's GDP (gross domestic product) and the alleged risks this poses for economic and fiscal sustainability".

The government said the Luxembourg finance sector acts as "an important gateway for the euro area by attracting investments and thus contributing to the general competitiveness of all member states".

Juncker's successor as eurozone head, Dutch Finance Minister Jeroen Dijsselbloem, has said that the Cypriot financial sector was too big compared with the country's overall gross domestic product, a problem that has forced Cyprus to break up one Cypriot bank and downsize another in exchange for an international bailout worth 10 billion euros ($13 billion).

While few eurozone economies depend on the banking sector as heavily as Cyprus does, Berenberg Bank economists noted on Monday that bank assets in three other eurozone countries were bigger as a percentage of gross domestic product than in Cyprus, where they amounted to more than 700 percent of GDP in 2011.

In Luxembourg, the percentage was an astounding 2,500 percent, the economists said, while in Ireland they were more than 800 percent and in Malta close to 800 percent. The eurozone average was given as 360 percent.

"The financial sector is oversized compared to the rest of our economy," a senior Luxembourg government official nevertheless told AFP on condition of anonymity.

And yet, European Union Markets Commissioner Michel Barnier was quick to insist earlier this week that "the problem is not Luxembourg -- it was certain banks in Ireland, in Spain, in Portugal." One of six founding members of the EU, Luxembourg is one of just four eurozone states -- alongside Germany, the Netherlands and Finland -- to have maintained a triple-A classification with all three major global credit rating agencies Moody's, Fitch and Standard and Poor's.

Its debt-to-GDP ratio is in the region of 20 percent -- compared to a target 120 percent for bailed-out partners -- and its deficit is well within the regularly-ignored EU threshold of three percent.

Yet Luxembourg has increasingly come under an EU microscope in post-global financial crisis legislative clean-up action, primarily for its culture of banking secrecy.Read the full story here.

Hmmmm.....As i wrote on Monday: Reading material Here:

Euroclear Bank is subject to effective regulation, supervision and oversight of the NBB and FSMA, but cooperation with the Luxembourg authorities should be improved.

The legal framework provides the Belgian authorities with sufficient powers to obtain timely information and induce change.
However, as Euroclear Bank is in competition with the Luxembourg based Clearstream Banking Luxembourg—which offers similar settlement and banking services––close cooperation with the Luxembourg authorities is needed to avoid any competition on risk management frameworks.

As both entities are highly relevant for the global financial stability the Belgian and Luxembourg authorities should evolve from the existing cooperation towards a cooperative framework that would allow them to take common decisions and implement these simultaneously in both entities.

The plans to include Euroclear Bank on the list of eligible banks for the SSM may further contribute to a level playing field.

77. The national securities depositories of Belgium, France, and the Netherlands, that share a common IT platform provided by the Euroclear Group, are subject to effective regulation, supervision, and oversight of the Belgian, Dutch, and French authorities, despite the fact that the legal frameworks differ substantially between the three countries. The cooperation between the different authorities is effective and contributes to the financial stability in Belgium, France, and the Netherlands. Crisis management frameworks are in place that are regularly tested and updated.