The Luxembourg Financial Ecosystem and the European Monetary Innovation. Cas Study on KBL, LuxSE and EIB (1957-1990)

The Luxembourg international financial centre developed considerably during the 1960s, propelled by several factors including concerted government policy, flexible regulation and a willingness to harness opportunities at international level (such as the 1963 US interest equalisation tax and the Bundesbank provisions introduced in 1968 and 1974). The decision to establish various Community institutions (the ECSC High Authority in 1952) and European funding institutions (the European Investment Bank in 1968) in the country also had a decisive impact. The currency union with Belgium (BLEU, 1921) and the absence of a Luxembourg Central Bank made these developments all the more significant. Drawing on archives and oral history sources, this paper aims to illustrate the complexity and originality that characterised the development of the conceptual, political and regulatory context in Luxembourg in the 1960s-1990s, in what can be seen as a sui generis experiment and preparation for EMU. It will explore the changing financial ecosystem in Luxembourg and the collaborative efforts by its main stakeholders (banks, regulatory authorities, individuals, networks) - with a focus on KBL, LuxSE and EIB - to encourage financial and monetary innovation (via the EUA, ECU, and Eurco) before the introduction of the European single currency and to pave the way for the establishment and consolidation of the euro