The assessment of Luxembourg’s large, interconnected, and complex financial system took place against heightened economic, financial, and geopolitical uncertainty. Investment funds have grown since the 2017 FSAP, while their connections to other funds, banks, nonbank financial intermediaries, and foreign entities have also increased. Domestic banks face risks from the ongoing downturn in credit and house price cycles, especially in the high-risk mortgage segment. Securities portfolios in large banks are mostly held-to-maturity and spread across euro area issuers. The banking sector maintains higher capital ratios than euro area peers, has low but rising nonperforming loans, and benefits from support to the economy from a AAA-rated sovereign.
- Format
- Paper
- Frequency
- regular
- ISBN
- 9798400278204
- ISSN
- 1934-7685
- Pages
- 72
- Published in
- United States of America
- Series
- Country Report No. 2024/157
- StockNumber
- 1LUXEA2024003
Table of Contents
- Glossary 6
- Executive Summary 8
- Macrofinancial Context 12
- Sources of Systemic Risks and Vulnerabilities 14
- Stress Test Results 18
- A. Summary 18
- B. Impact of Severe Stagflation on Financial and Non-Financial Private Sectors 20
- C. Impact of Bank Deposit Runs 22
- D. Impact of Investment Fund Redemptions 23
- E. Impact of Insurance Lapses 24
- F. Second-Round Impact of Securities Sales 24
- G. Sensitivity Analyses 25
- Financial Sector Oversight 26
- A. Cross-Cutting Themes 26
- B. Macroprudential Policy and Framework 27
- C. Investment Funds Sector 29
- D. Banking Sector Supervision of LSIs and Third-Country Branches 31
- E. Insurance Sector Supervision 31
- F. Financial Market Infrastructure—Cyber Resilience 32
- G. Financial Integrity 33
- Financial safety net and Crisis Management 33
- Authorities’ Views 34
