A Typology of Captive Financial Institutions and Money Lenders (sector S127) in Luxembourg

Di Filippo, Gabriele and Pierret, Frédéric (2020): A Typology of Captive Financial Institutions and Money Lenders (sector S127) in Luxembourg. Published in: BCL Working Paper No. 146 (July 2020): pp. 1-62.

Abstract

The paper presents a typology of captive financial institutions and money lenders (sector S127) in Luxembourg. Given data availability, the analysis relies on a sub-sample of the whole population of S127 firms. This sub-sample features S127 firms whose total assets are at least equal to EUR 500 million. As of Q4 2018, this sub-sample represents about 5% of the total number of S127 firms in Luxembourg, and about 85% of the total assets held by S127 firms in Luxembourg. The period of analysis spans Q4 2014 to Q4 2019. In terms of number and on average over the period Q4 2014 – Q4 2019, the sample of S127 corporations regroups holding corporations (42%), intragroup lending companies (25%), mixed structures (19%), conduits (7%) and loan origination companies (4%). These corporations represent about 98% of the total number of S127 companies whose total assets of at least EUR 500 million. The remaining types that complete the sample of S127 entities consist of captive factoring and invoicing corporations, companies with predominant non-financial assets, extra-group loan origination firms, wealth-holding entities and captive financial leasing corporations. In addition, on average over the period Q4 2014 – Q4 2019, holding corporations own the largest share of total assets (55%) followed by intragroup lending companies (22%), mixed structures (14%), conduits (6%) and loan origination companies (2%). These corporations account for about 99% of the total assets held by S127 companies whose total assets are at least equal to EUR 500 million. The relative importance of holding corporations, intragroup lending companies, mixed structures, conduits and loan origination companies suggests that Luxembourg plays the role of a global financial centre for MNEs. The latter benefit from Luxembourg as a financial platform to manage their business activities and structure their corporate investments.

• Item Type: MPRA Paper
• Language: English
• Keywords: Captive financial institutions and money lenders, Sector S127, Typology
• Subjects: C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs > C80 - General; C - Mathematical and Quantitative Methods > C8 - Data Collection and Data Estimation Methodology ; Computer Programs > C81 - Methodology for Collecting, Estimating, and Organizing Microeconomic Data ; Data Access; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure

References

Amit Raphael, Liechtenstein Heinrich, Prats Julia M., Millay Todd, Pendleton Laird P., 2007, “Single Family Offices: Private Wealth Management in the Family Context”, Wharton Global Family Alliance, The Wharton School, University of Pennsylvania, 2007 https://wgfa.wharton.upenn.edu/wp-content/uploads/2017/05/SFO-Private-Wealth-Management-in-the-Family-Context.pdf

Banque Centrale du Luxembourg (BCL), 2014, “Report TPTIBS: Monthly Security by Security Reporting of Financial Companies”, p. 1-37, December 2014 http://www.bcl.lu/en/Regulatory-reporting/Societes_financieres/Instructions/TPTIBS/TPTIBS_L1_instructions_EN.pdf

Bolwijn Richard, Casella Bruno, Rigo Davide, 2018, “An FDI-driven Approach to Measuring the Scale and Economic Impact of BEPS” in Transnational Corporations Investment and Development, Vol. 26, No. 2, Special Issue on Investment and International Taxation Part 1, United Nations publication issued by the United Nations Conference on Trade and Development https://unctad.org/en/PublicationChapters/diae2018d4a7.pdf

Cadestin Charles, De Backer Koen, Desnoyers-James Isabelle, Miroudot Sébastien, Ye Ming, Rigo Davide, 2018, “Multinational Enterprises and Global Value Chains: New Insights on the Trade-Investment Nexus”, OECD Science, Technology and Industry Working Papers 2018/05 https://www.oecd-ilibrary.org/docserver/194ddb63-en.pdf?expires=1583134427&id=id&accname=guest&checksum=1AAE11190CB941874C9F4B5D32D907F8

Dunning John H., Lundan Sarianna M., 2008, “Multinational Enterprises and the Global Economy”, Second Edition, Edward Elgar, Cheltenham, UK, Northampton, MA, USA

ECB-Eurostat-OECD, 2013, “Final Report by the Task Force on Head Offices, Holding Companies and Special Purpose Entities (SPEs)”, June 2013 https://ec.europa.eu/eurostat/documents/737960/738007/Final_Report_Task_Force_SPEs.pdf/9390b392-62d3-45b4-a4ee-fd9ed7a78da2

European Central Bank (ECB), 2015, “Who holds What? New Information on Securities Holdings”, ECB Economic Bulletin, Issue 2, p. 72-84, March 2015 https://www.ecb.europa.eu/pub/pdf/other/eb201502_article02.en.pdf?59ee8bfccc28ae92a937ec7b532ad89e

European Central Bank (ECB), 2010, “The “Centralised Securities Database” in Brief”, European Central Bank - Eurosystem, p. 1-7, February 2010 https://www.ecb.europa.eu/pub/pdf/other/centralisedsecuritiesdatabase201002en.pdf

European Commission (EC), 2013, “European System of Accounts ESA 2010”, Theme: Economy and Finance Collection: Manual and Guidelines, Luxembourg: Publications Office of the European Union, 2013 https://ec.europa.eu/eurostat/documents/3859598/5925693/KS-02-13-269-EN.PDF/44cd9d01-bc64-40e5-bd40-d17df0c69334

Finnerty Chris J., Merks Paulus, Petriccione Mario, Russo Raffaele, 2007, “Fundamentals of International Tax Planning”, International Bureau of Fiscal Documentation (IBFD), July 2007

Hoor Oliver R., 2018, “Transfer Pricing in Luxembourg”, Legitech, Editions Juridiques et Fiscales, Edition 2018 International Bureau of Fiscal Documentation (IBFD), 2012, “Transfer Pricing and Intra-Group Financing: the Entangled Worlds of Financial Markets and Transfer Pricing”, Anuschka Bakker and Marc M. Levey Editors, 2012 IBFD, Amsterdam

International Monetary Fund (IMF), 2018, “Final Report of the Task Force on Special Purpose Entities”, IMF Statistics Department, BOPCOM—18/03 For discussion, Thirty-First Meeting of the IMF Committee on Balance of Payments Statistics, Washington, D.C. October 24–26, 2018 https://www.imf.org/external/pubs/ft/bop/2018/pdf/18-03.pdf

International Monetary Fund (IMF), 2017, “Monetary and Financial Statistics Manual and Compilation Guide”, IMF, Washington, D.C., 2017

International Monetary Fund (IMF), 2009, “Balance of Payments and International Investment Position Manual”, Sixth Edition (BPM6), Washington D.C. https://www.imf.org/external/pubs/ft/bop/2007/pdf/bpm6.pdf

Moyse Laurent, Meiers Claude, Maquil Michel, 2014, “The Architects of Luxembourg’s Financial Industry: Personal Accounts of the Origins and Growth of the International Financial Centre”, Editions Saint Paul (English version)

Moyse Laurent, Meiers Claude, Maquil Michel, 2014, “Les Artisans de l’Industrie Financière: Témoignages sur l’Origine et le Développement de la Place Financière de Luxembourg”, Editions Saint Paul (French version)

Norman Peter, 2008, “Plumbers and Visionaries: Securities Settlement and Europe’s Financial Market”, John Wiley and Sons, January 2008

Organisation for Economic Co-operation and Development (OECD), 2008, “Benchmark Definition of Foreign Direct Investment”, Fourth Edition https://www.oecd.org/daf/inv/investmentstatisticsandanalysis/40193734.pdf

Pérez Asier Cornejo, Huerga Javier, 2016, “The Centralised Securities Database (CSDB) - Standardised Micro Data for Financial Stability Purposes”, IFC Bulletins chapters, in Bank for International Settlements (ed.), Combining micro and macro data for financial stability analysis, Vol. 41, Bank for International Settlements https://www.bis.org/ifc/events/ws_micro_macro/perez_paper.pdf

United Nations (UN), 2009, “System of National Accounts 2008”, New York 2009 https://unstats.un.org/unsd/nationalaccount/docs/SNA2008.pdf

United Nations (UN), 2008, “International Standard Industrial Classification of All Economic Activities, Revision 4”, Statistical papers Series M No. 4/Rev.4, Department of Economic and Social Affairs Statistics Division, New York, 2008 https://unstats.un.org/unsd/publication/seriesM/seriesm_4rev4e.pdf

World Bank (WB), 2020, “World Development Report 2020: Trading for Development in the Age of Global Value Chains”, Washington, DC: World Bank https://openknowledge.worldbank.org/handle/10986/32437