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We are pleased to present the fourth edition of the ABBL and EY Cost of Regulation Survey for Luxembourg’s banking sector. This report provides a comprehensive view of how regulatory requirements continue to shape the financial landscape, influencing cost structures, operational priorities and strategic decisions.
The survey, conducted among 22 institutions representing a significant share of market assets and employment, highlights the growing complexity and financial impact of compliance obligations. From anti-money laundering and tax transparency to operational resilience and ESG integration, banks face regulatory challenges that require sustained investment in technology, talent and governance.
Download the EY & ABBL Report to discover more about the cost of regulation for banks in Luxembourg.
Regulatory investment costs represent 41% of total investment expenditures on average
Annual recurring costs for AML/CFT remain some of the highest, making AML/CFT the top regulatory priority
Highest average number of regulatory staff reported for significant credit institutions
On average banks spend the most on the Markets and Payments regulatory area
Key highlights of the study
Larger institutions incur significantly higher absolute regulatory costs
Investment and recurring costs reached €8.1 million and €20.7 million respectively for significant credit institutions. However, when adjusted for institutional size (using net banking income as a proxy), smaller institutions bear a proportionally higher regulatory burden, highlighting a structural disadvantage in meeting compliance requirements with limited resources.
Smaller institutions allocate a larger proportion of staff to regulatory roles
Significant credit institutions reported the highest average number of regulatory staff (127 full-time equivalents (FTEs)), compared to 30 FTEs for credit institutions and seven FTEs for EEA/non-EEA branches. However, when viewed as a percentage of total staff, smaller institutions dedicate a larger share to regulatory roles (up to 21%) versus 12% for significant institutions.
Regulatory cost is more pronounced for smaller institutions
Since smaller individuals allocate more staff to regulatory roles, they have a relatively higher regulatory burden. While larger institutions benefit from scale, smaller ones face a proportionally higher regulatory burden.
Luxembourg is more costly than other EU countries
The average fully loaded annual cost of a regulatory FTE in Luxembourg was found to be significantly higher than both the EU average and Luxembourg’s general labor cost, indicating a substantial cost impact for compliance roles.
Anti-money laundering and tax evasion are the top regulatory priorities
Banks continue to focus on regulations related to the fight against financial crime and tax evasion, followed by financial stability. Anti-money laundering (AML) remains the top priority among institutions. MiFID II also retains its relevance, reflecting its ongoing importance in market conduct regulation.
