Draft law 7024: implications for employment must be re-evaluated

The presentation of government amendments to draft law 7024 which will alter article 41 of the 5th April 1993 law related to professional secrecy in the financial sector.

At his request, the finance minister met representatives of the financial sector unions ALEBA, OGBL/SBA and LCGB/SESF on 6th March.

Before detailing his suggested amendments, Minister of Finance Pierre Gramegna explained his motivation for these changes. He said that adding flexibility to professional secrecy is needed to guarantee the medium and long term viability of the financial sector. The ultimate aim is, above all, to enable banks to remain competitive and thus encourage employment growth through in-sourcing. He believes more legal flexibility will encourage banks and new financial sector service providers to come to Luxembourg.

Article 41 as originally drafted would not be tenable, as it goes against the desire for greater openness and the government’s efforts to counter money laundering while maintaining a competitive financial sector.

The minister is aware that modernising professional secrecy would allow more out-sourcing, and that there is a risk of substantial job losses. The unions focused heavily on this point. The minister sought to calm these strong concerns by underlining his belief that new jobs would we created over time as businesses internalised processes.

The main amendments suggested can be summarised as follows:

  • introduction and reinforcement of the responsibility of the sub-contractor (including any further out-sourcing agreements they would make) in order to stabilise and better control the behaviour of actors along the supply chain;
  • requirement that out-sourcing should not affect the ability of the regulator to act;
  • modernisation of the legal framework to be extended to out-sourcing by insurance and payment services operators.

Union representatives still remain concerned about the potential negative impact of this change on employment in the sector. There is doubt if the creation of new jobs would adequately compensate any losses.

Besides, it is likely that the nature of any new jobs will be different, requiring staff to have an alternative range of skills. The unions fear that the optimistic picture envisaged by the government will in fact only see group headquarters coming to Luxembourg, without businesses bringing IT operations to the country. Then there is the risk of greater out-sourcing and the transfer abroad of departments and whole entities.

The unions also criticised the lack of any study into the potential impact of this change on employment in the sector. What measures will be put in place to ensure a positive outcome from the out-sourcing/in-sourcing trade off? Which jobs will be in-sourced and what skills will be sought?

The finance minister said that the government and the High Committee for the Financial Sector are aware that a coordinated effort will be needed to guarantee a future for the industry, particularly regarding skills and adequate professional retraining.

However, the unions again had cause to regret that they are not members of this High Committee, and they repeated their demand to be invited to join. Given that Luxembourg’s economy depends on the health of the financial sector, the unions insisted that they need to be involved when change is envisaged. This is necessary to ensure the protection of workers and professional qualifications.

Given these changes and risks, the two sides agreed that it is essential to carry out an assessment of which skills are currently available, and those which will be needed in the future. This transition must engage the responsibility of all participants in the financial sector.

Joint press release from the unions ALEBA, OGBL-SBA and LCGB-SESF

13th March 2017