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

Numéro146
DateJuly 2020
AuteurGabriele Di Filippo and Frédéric Pierret
Résumé

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.

Keywords: Captive financial institutions and money lenders, Sector S127, Typology

JEL codes: C80, C81, L22

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