Financial Stability

At the ABBL we recognise that financial stability is the foundation of trust in the financial system.

Through our technical committees and continuous dialogue with our members, we address all types of risks that could affect the stability of Luxembourg’s financial sector. Our mission is not only to support financial institutions in managing these risks, but also to promote awareness across the industry and among the public of financial stability challenges within the euro area.

To achieve this, we operate across four key pillars:

Promoting Strong Conduct and Good Governance

Effective governance and ethical conduct are the cornerstones of financial stability. The ABBL promotes and helps enforce high standards in:

• Corporate governance and Board accountability.
• Risk oversight and internal control structures.
• Ethical conduct, transparency, and compliance culture.

By embedding these principles into institutional frameworks, we help maintain public trust, reduce misconduct-related risks, and strengthen the foundations of a stable financial system.

Addressing Systemic and Emerging Risks

The ABBL actively supports its members in the prevention, assessment, and mitigation of financial and non-financial risks that could destabilise the financial system. These include:

• Market Risk
  Exposure to adverse movements in financial markets, such as equities, bonds, currencies, and commodities.
• Macroeconomic Risk
  Systemic vulnerabilities driven by inflation, economic slowdowns, interest rate volatility, or sovereign debt sustainability concerns.
• Geopolitical Risk
  Volatility triggered by political instability, conflict, trade disruptions, or sanctions that can affect sovereign risk, investor confidence, and global capital flows.
• Operational Risk
  Failures in systems, processes, or infrastructure—especially in a digitised environment—can propagate across institutions through contagion and reputational damage.

• Liquidity Risk
  The inability to buy or sell assets without affecting their price, posing challenges for funding and market-making activities in times of stress.
• Credit Risk
  Borrower default risk—whether corporate, sovereign, or individual—which directly impacts asset valuations, portfolio quality, and capital buffers.
• Cybersecurity Risk
  The potential impact of loss, damage or disruptoon resulting from breaches or failures in digital systems, processes or technologies.
• ESG risks
  The impact on company’s financial performance, reputation, and long-term sustainability arising from social, environmental, social and governance factors.

With these risks being increangly central to corporate strategy and risk management, we have at ABBL a full team dedicated to the topic.

Advocating for Sound and Balanced Regulation

The ABBL represents the interests of the Luxembourg financial industry in policy discussions and regulatory consultations at both national and European levels. We work to:

• Shape regulation that promotes market resilience without imposing unnecessary burdens.

• Prevent regulatory fragmentation or overreach that could unintentionally undermine market functioning.

• Ensure that evolving rules around ESG, digitalisation, and prudential standards are synchronised and proportionate.

We provide a structured, unified voice for the banking sector, contributing to policies that protect long-term financial stability and competitiveness.

Supporting Crisis Response and Scenario Planning

In times of stress or uncertainty, the ABBL helps coordinate the sector’s response to:

• Rapidly evolving geopolitical or macroeconomic shocks.
• System-wide disruptions such as cyber incidents, pandemics, or financial contagion.
• Cross-border regulatory challenges that demand agile, collective action.

We contribute to developing resilience strategies, facilitating scenario analysis, and sharing best practices in crisis management, helping the sector stay agile under pressure.