CSSF watchdog in massive fee hike to cover deficit
By John Monaghan and Kate Oglesby
Companies regulated by Luxembourg’s financial watchdog will see a steep rise in fees from January as the body aims to cover a budget gap caused by rising staff numbers to oversee the country's outsized financial sector.
The CSSF will ramp up its fees by more than 10% in many services and by far more in some other areas from next year, the regulator said this week, after keeping fees it levied unchanged since the beginning of 2018.
The Commission de Surveillance du Secteur Financier recorded a loss of around €12.5 million in 2020, though its financial reserves amount to €60 million. It has almost 1,000 staff at present, having doubled in size in the past decade.
"The amounts of current taxes no longer manage to cover the costs of exercising surveillance," read legislation approving the rise, which was backed by the government council in November.
Under the new structure, all credit institutions, such as banks, will now have to pay a €50,000 one-off fee to get their licence from the CSSF, representing a three-fold increase from the current €15,000 invoice.
The watchdog also introduced a raft of new fees which did not previously exist, such as a €15,000 charge for every major shareholding change - defined as affecting at least 10% of an institution's capital or voting rights.
Investment firms seeking recognition as a regulated entity will have to pay a €40,000 lump sum, while market operators will have to pay an annual flat rate of €450,000 for the supervision of each regulated market in the country.
A €15,000 levy will apply to financial holding companies wishing to register in the Grand Duchy, who submit files for authorisation.
Annual maintenance fees have also increased for all banks, with a yearly rise of between €12,000 and €67,500, depending on size. For the smallest lenders with less than €500 million in assets, the new fee will be set at €97,000 - up from the current €85,000. For those with more than €2.5 billion, there will be an additional €67,500 charge, bringing the total bill to €407,500.
The huge price increases come as the regulator grapples with a budget deficit and increased staffing costs. Nearly 80% of the CSSF’s budget is comprised of staffing costs, spokesman Paul Wilwertz told the Luxembourg Times earlier this year. “The institution is subject to structural effects over which it has no control,” Wilwertz he said, refering to Luxembourg's wage indexation system, whereby salaries automatically increase in line with inflation.
The CSSF budget is agreed as part of a multi-year cycle, a factor which the regulator said in its 2020 annual report allows it to guarantee "the financial balance of the CSSF in the long term".
The regulator is not financed by the public purse and its revenues are mainly composed of the taxes collected from supervised entities. It is unclear from the 2020 annual report whether fines supervised banks pay to the regulator are attributed to the overall operating budget or held in reserve.
Before the previous fee rates were agreed at the end of 2017, Luxembourg's State Council - the main advisory body to the government - warned that continuing rises in operating costs would make it "essential to look into the structuring of the financing of the CSSF".