There is a cruel irony about Luxembourg banking. However well it does, in the hardest of economic conditions, it is not large enough to create a private sector bank capable of competing with the largest European banks. The country has no less than 154 banks, but the great majority are subsidiaries of other European banks. The country's financial institutions are highly vulnerable to the machinations that take place in Paris, Brussels, Amsterdam and Frankfurt.
The small may be virtuous, even rich, but they will never be powerful. That is the lesson of recent events in Paris, where European giant BNP Paribas is on the verge of snapping up Fortis Luxembourg, the subsidiary of Fortis Belgium, of which the Belgian government owns 100%. Fortis Luxembourg, which is now owned 49% by the Luxembourg government following the bail-out, has understandably sought to distance itself from the failure of its parent by reverting to its former name Banque General de Luxembourg (BGL).
