Frank Jons: chromatic explosions!
He could have ended up as a partner in an auditing firm, but a job interview convinced him to follow his true calling: painting. Interview.
Jerry Grbic (ABBL): The Future of Finance
Having taken office in April 2022, Jerry Grbic, CEO of the ABBL, is seeking to address the challenges of the financial sector by focusing on digitization, regulation, and education. Interview.
Can you introduce the ABBL in a few words?
The ABBL is the largest professional association in the financial sector in Luxembourg. Its membership comprises the majority of financial institutions, regulated financial intermediaries, and other professionals including law firms, consultancies, auditors, market infrastructure, e-money, and payment institutions. In addition, we represent the diversity of the Luxembourg financial center, enabling us to give the entire industry a voice at the national and international levels. We have 244 members: 184 full members, 60 associated members, and 20 affiliates in our active FinTech circle. We provide our members with the information, resources and services needed to operate in a dynamic financial market and increasingly complex regulatory environment. An open platform facilitates the discussion of key issues and defines common positions for financial and banking activities.
"Our mission remains the same: to promote the sustainable development of regulated, innovative, and responsible banking services in Luxembourg." Jerry Grbic
What risks and challenges do you identify for the banking industry?
There are many challenges, including the current inflationary environment, following the economic downturn caused by the pandemic, and geopolitical events. Thus, we need to react to the uncertainty and address the following three major challenges: managing the transition to a sustainable financial model, attracting talent, and maintaining profitability. Regarding the first, Europe is still very dependent on fossil fuels - mainly Russian. This implies a transition to renewable energy. Banking will have to contribute to financing this transition, despite a slow and costly process. One measure is the industry-led Net-Zero Banking Alliance that has been convened by the United Nations. The Alliance brings together banks from around the world representing about 40% of global banking assets. It is committed to aligning its members' lending and investment portfolios with net zero emissions by 2050, with an intermediate target for 2030. This starting point does not exclude pushing banks to realign their portfolios in the short term. On the other hand, we also have to deal with all the European regulations related to sustainable finance, which create new costs and challenges. Banks, therefore, need to understand where our clients are in relation to the environment; to what extent they may be exposed, and how we can effectively help them in this transition, notably by developing our own expertise. Indeed, we want to increase knowledge among our staff and recruit specialists. As the nature of the banking business has evolved to accommodate both stricter regulation and increased digitization, the profiles to perform these tasks have changed. We are seeing a shortage of qualified candidates in many areas related to governance, compliance, and risk management, as well as an absolute shortage of IT staff. We need to offer competitive conditions, beyond salary, to attract the right talent, including tax incentives for expatriates/inpatriates, and flexible work, especially for cross-border workers. We need to address the shortage of affordable housing in Luxembourg, as well as infrastructure issues such as transportation and mobility. Training our own talent is also a priority for the ABBL, and we work closely with various entities in the academic field, from the University, the House of Training and the Ministry of Education. However, the importance of the financial sector for the local economy lacks recognition at both political and academic levels.
Finally, we recently pointed out that a fifth of the banks in Luxembourg are not profitable. Indeed, the enormous cost of regulation means that each must have a certain critical mass to absorb these costs. Many small private banks, subject to the same level of regulation as a large institutions, risk being consolidated, merged, or sold. Digitization is also a cost. The banking sector has safe and secure IT systems, but not particularly agile ones. Adapting these systems to provide the services our customers want, while maintaining the required security and competing with new players, has cost a fortune in time and money. New players can create their systems from scratch, bypassing the clunky technology on which we have relied, and focus on the customer journey from the start. But the banks have recognized this and we are now seeing a shift in tactics. We have a lot to learn from our competitors, including working more closely with FinTechs. Many initiatives across Europe are also bridging the gap between traditional banks and start-ups. As a result, the former can take advantage of low-cost technology. FinTechs can come in with an embryonic idea and benefit from the wealth of experience of traditional structures to help them develop the products and services needed by the market. Finally, customers will benefit from the ultra-fast, efficient and secure services they expect from their banking partners.
How are your members' needs changing?
Our membership demographic has evolved and, while we are still primarily bank-focused, we have opened our association in recent years to include members of the broader financial ecosystem. We continue to advocate for our members' interests in regulation, always emphasizing a level playing field, simplicity of implementation, and a pragmatic approach. New challenges arise, in particular, in sustainable finance, where measuring, reporting, and managing corporate social responsibility, sustainable finance, and human rights are gaining importance. Digital issues such as cybersecurity, data management, cloud computing, and open banking are also taking center stage. Nevertheless, our mission remains the same: to promote the sustainable development of regulated, innovative, and responsible banking services in Luxembourg.