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IFN 2011 Issuers and Investors Europe Forum Country Presentation Luxembourg Islamic Finance in Luxembourg Jean-Marc Goy One Bishops Square, London 8 July 2011.

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  1. IFN 2011 Issuers and Investors Europe ForumCountry PresentationLuxembourgIslamic Finance in Luxembourg Jean-Marc GoyOne Bishops Square, London8 July 2011

  2. Some Quick Facts about Luxembourg● Area : 2,586 km²● Population : 512,000●Capital City: Luxembourg● Head of State: HRH Grand Duke Henri● Head of Government: Prime Minister J.-Cl. Juncker●Currency: Euro● Nationalities : 170● Recorded written history of Luxembourg begins in 963●Luxembourg reached Independence in 1839 ● Luxembourg is a Parliamentary Representative Democracy with a Constitutional Monarchy – it’s the world’s only remaining sovereign Grand Duchy● Luxembourg is a Founding Member of the European Union● Luxembourg is politically and economically stable● Luxembourg is multilingual

  3. Some Quick Facts about LuxembourgLuxembourg Financial SectorLeading European financial centre for investment funds (second worldwide, after the U.S.A.)Leading Financial centre for wealth management in the EurozoneNumber of banks: 144Number of investment funds (30 April 2011): 3,724Assets under management for Luxembourg investment funds: 2,195.408 billion EURLuxembourg is an international hub for financial services

  4. Some Quick Facts about LuxembourgLuxembourg does not only rely on its financial sector thoughOne of the biggest Steel Companies in the world: Arcelor MittalOne of the biggest European Television and radio broadcasting Company: RTL Group, which has interests in 34 different TV channels in different countriesOne of the biggest satellite companies in the world: SES

  5. The Commission de Surveillance du Secteur Financier (CSSF) is the Luxembourg Supervisory Authority of the Financial Sector- The CSSF is a Public Institution with a legal personality and with a financial autonomy- The CSSF is placed under the political authority of the Minister of Finance- The CSSF is responsible for the supervision of the entire Luxembourg Financial Sector, except for the Insurance Sector- Currently the CSSF employs 394 persons

  6. The Commission de Surveillance du Secteur Financier (CSSF) is the competent authority for the supervision of:- Credit Institutions - Other Professionnals of the Financial Sector, including Investment Firms - Investment Funds - Management Companies of Investment Funds - Pension Funds - Investment Companies in Risk Capital (SICARs) - Securitization Vehicles - Stock Exchanges - Securities Markets and their operators - Payment and Securities Settlement Systems - Electronic Money Institutions - Credit Rating Agencies - the Audit Profession

  7. Islamic Finance in LuxembourgIn 1983, the first Shariah compliant insurance company in Europe was established in Luxembourg In 2002 the Luxembourg Stock Exchange was the first European stock exchange to list a sukukToday, there are 16 sukuks listed on the Luxembourg Stock Exchange, with a total value of some 7.5 billion EURThe Luxembourg government has repeatedly stressed that Islamic finance is one of the important fields it wants to develop in view of its policy for the financial sector

  8. Islamic Finance in LuxembourgA working group has been created within the Ministry of Finance, which examines, in general, Islamic finance related issues and requirementsThis working group is composed of representatives of the Ministry of Finance, the Ministry of Foreign Affairs, the CSSF, the Luxembourg Bankers' Association (ABBL) and the Association of the Luxembourg Fund Industry (ALFI)

  9. Islamic Finance in LuxembourgThe Luxembourg tax authorities have issued a circular to clarify the tax treatment of some of the main types of Islamic financial instruments, i.e. in particular murabaha and sukukThe aim of this circular is to clarify that Shariah compliant financial products receive the same tax treatment as conventional financial productsThe circular takes a substance‑over‑form approach for murabaha and indicates that for tax purposes, sukuk are treated like conventional bonds

  10. Islamic Finance in Luxembourg Issuers of sukuk have recognised the attractiveness of the Luxembourg legal framework for Islamic finance The rules applicable to listings of sukuk on the Luxembourg Stock Exchange are essentially the same as the rules applicable to listings of sukuk on the London Stock Exchange

  11. Islamic Finance in Luxembourg Rules applicable to sukuk, as regards the Annexes to the EU Prospectus Regulation EC 809/2004: Sukuk may be treated as1) asset backed securities pursuant to the provisions of Article 2.5 of the Prospectus Regulation or, 2) guaranteed debt securities pursuant to Article 23.2 and Annex VI of the Prospectus Regulation (if the payment of principal and the periodic distributions are independent from the performance of the underlying asset)

  12. Islamic Finance in LuxembourgIslamic investment funds may be set up in Luxembourg under the general legal framework applicable to investment funds, i.e. the law of 17 December 2010 relating to undertakings for collective investment or the law of 13 February 2007 concerning specialised investment funds (this law applies to funds that reserve their shares to one or several well informed investors)

  13. Islamic Finance in LuxembourgIt is common practice that Islamic investment funds set up a “Sharia Board” where the members assess the compliance of the investments with the Sharia preceptsWhere such a “Sharia Board” is planned, the role, the competences and the practical details of the “Sharia Board” have to be described in the prospectusThe applicable regulatory principles have to be fulfilled in consideration of the role of the “Sharia Board”, which can be acting in an advisory role (which is generally the case) or in a decision-making role

  14. Islamic Finance in Luxembourg Luxembourg is currently the 4th largest Financial Centre for Islamic Investment Funds Worldwide, and the largest in the European UnionSome 40 Luxembourg Islamic Investment Fund Units with Assets under Management of almost 500 million USDMost of the Luxembourg Islamic Investment Funds are UCITS

  15. Islamic Finance in Luxembourg The CSSF has regular contacts with certain Supervisory Authorities of Jurisdictions that are active in the context of Islamic FinanceThe CSSF has signed Memoranda of Understanding (MoUs) with certain Supervisory Authorities of Jurisdictions that are active in the context of Islamic Finance

  16. Islamic Finance in Luxembourg Conclusion:The Luxembourg legal and regulatory framework is well adapted for the set up of Islamic financial instruments, Islamic transactions and Islamic investment funds

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