Banking at the heart of Luxembourg

Banking at the heart of Luxembourg

Françoise Thoma, CEO and President of the Executive Committee, Banque et Caisse d’Épargne de l’État (Spuerkeess), overseas a bank that seeks to provide the backbone to Luxembourg’s growth.


Spuerkeess enjoys a stellar reputation among Luxembourgers as it is consistently rated the best bank in Luxembourg, while also employing 1,800 people. To begin the interview, what would you say is your management philosophy, and what is your approach to running a company with so many people?

That’s a very important question especially in today’s time, where being a manager is not simply being at the top of a hierarchy. I am actually the president of an executive committee of five members, and we have a collective responsibility over all the activities of the bank. However, as the chairman and president, of course I have a predominant role to play. I would qualify my style as integrative and inclusive because when transiting from a quite hierarchical to a more collaborative operating model, I believe that an inclusive management style is really the transition enabler, to take people along the way you want and engage them with the strategy you decide as a management team.

Besides that, I think I am quite an empathic person. I really try to understand people and to put them on board and to convince them on executing decisions rather than constrain them. I want to take them along the way with management. This also means that I am very present and hands on at the bank.

I’m also quite a resilient person. Moreover, I try to be enabling and inspiring for others. But I have to stress that I’m not infallible, so I also accept my shortcomings and my weaknesses. It is important to be aware of that as well.

These are the characteristics that describe my management style.

Also, it is very important to say that management today is not something abstract. Management capacity is always contextual. You have to be a leader in a given time and in a given geography. The context commands the style with which you lead an entity.


Talking about changes and context, the COVID-19 pandemic has definitely changed the way we are working and relating with others and, most importantly, in the way businesses are run. How did the pandemic affect your priorities at Spuerkeess?

The first thing we had to cope with was how to keep the bank running. Now, with 18 months hindsight, things seem to be almost obvious. But at that point, no one really knew what was going to happen. Fortunately, we were in a situation where we had solutions in the drawer, especially from the technical point of view. And actually, COVID-19 acted as an immense accelerator of these developments. So, we just had to finalize solutions we had already implemented. I was absolutely stunned at how quickly and positively all our teams embraced the change, how quickly people got used to working with Teams remotely.

The premises of the bank allowed, even through the darkest days of the pandemic, to have certain amount of people on premises. We were never below a 20 to 25 percent of on-site presence. And the top management actually never left the bank. I was constantly in the office. At the beginning, we met over video conference or telephone every day and even on weekends if necessary. So there was some uncertainty to handle, and also it was very important to be very close to the employees, so we gave very often direct messages from the general management, showing them that we care for them, that we trust them. Clients were concerned at the beginning because we did not know especially how the corporates would come through the pandemic. The worst we had expected did fortunately not materialize. The Luxembourgish economy is made especially of small and medium-sized companies who had some financial reserves to rely on. The companies that had to close were very often already weak before the pandemic and they did not survive.

It is also important to stress that the Luxembourgish government, right from the beginning, had put in place a whole array of different types of support for corporates and especially for the sectors that were completely shut down, like tourism, restaurants, sports facilities and body care. All these sectors got notable amounts of non-refundable help from the Government. There was a special type of loan instrument put into place to help corporates, a type of loan that was extended through the banks. So, banks were part of the solution, not part of the problem. However, this tool was not widely used in Luxembourg because the healthy corporates have quite considerable fund reserves and they preferred first to rely on those rather than take additional loans.


Between December 31st, 2019 and 2020, Spuerkeess saw an estimated operating income loss of 1.3% year-on-year, although it also experienced an increase in the number of customer deposits and total assets. How do the numbers look this year and what is your outlook for 2021 and beyond?

We are optimistic because, for 2021, we forecast an operating income of around $615 million, and then we expect this to go up in 22-23, between 2.5 and 4.5 percent per year, which shows that the health of the bank is quite good. Actually, the activities of the bank are quite healthy and on the increase. We believe the bank is in quite good shape and we are prudently optimistic for the future.


As part of your 2021-2025 Strategic Plan, you have outlined sustainability, ESG and digitization as your top priorities. Can you tell us about your major achievements in these areas and the company’s performance in recent years?

As you rightly say, these are major drivers of our strategy. Regarding the ESG, we have an approach of being a transition enabler, because we believe that our role is to take our customers along a transition journey. As a bank, we have the normal business that all other banks have, but as a public-owned bank, we also have a special social mission in the country. The mission is clearly to accompany customers in this transition journey, and this is especially the case for corporates, especially small and medium. Of course, they might be reluctant to enter into ESG transition because they can rightly believe that this is at a cost to them. We have to address these anxieties and show them that in ESG there is an initial investment cost, but at medium and long term there is definitely a return on being ESG compliant. And so, we have both a transition enabler role in that and a pedagogical role towards our customers. For example, we have now put something into place, which we called the one-stop shop, where we inform them about all kinds of subsidies, supports—both from public and private sources—if they want to improve ESG-wise.

Now, on the retail side, we have enhanced the ESG orientation of our investment portfolios. In ESG, it’s important to be very coherent in all what you say and what you do. First of all, say what you do and do what you say. And don’t promise things you can’t keep in the end, because you have only one first chance to be honest on this. We try to be very coherent and homogenous throughout all our activities, meaning that both our own assets, but also the portfolios offered to customers for investments have the same underlying investment philosophy, with the same ESG exclusions, the same taxonomy and so on.

We have also quite recently created the Scientific Advisory Board, and this is a quite a unique initiative in Luxembourg. We have gathered together about a dozen academic scientists and finance experts from around the world. The aim is to translate erratic ESG concepts and metrics into concrete measures and products around climate and nature-related risk management. This board will define science-based targets which help financial actors to be more objective than if they developed in-house key performance indicators (KPIs). So, these are scientific KPIs. You can use them in a bank or as a fund advisor in your climate risk management. This is something very concrete.


Talking about digitization, a lot of companies are digitizing their operations. How is this going for your bank?

Even before the pandemic we had started an important project called Connect, by which we wanted to digitize both internal processes and also channels of communication with our clients.

Regarding internal digitization, the most important principle is that you should not automatize complexity. Digitization does not mean just translating the old processes into something more automatic. You really have to reshape, to rethink the work flows, to eliminate complexity, to simplify quite generally, and this requires new thinking. This new thinking is not only of a technological nature. The human change management behind is maybe even more important because you have to convince employees that these new ways of working are something of added value for them.

Moreover, we have very heterogeneous clientele. We have more conservative clients who want to come to the branch office for a personal contact. These clients are very important for us. They have constructed the bank, in a manner of speaking, and we want to accommodate their needs. So there will be a physical branch network for Spuerkeess over the years to come. We also have to address the needs of other types of clients, younger clients, maybe also expats who come to Luxembourg, people who want to do their banking at night, on Sunday morning, and, for 20 years, we’ve have S-Net, Spuerkeess-net banking, which is the most performant internet banking tool. In Luxembourg, we have 250.000 customers on that. We are doing new releases almost once a month, and customers don’t even notice it because it is just something small that improves.

Just before the pandemic, by chance, we opened a branch which is completely digital, called Spuerkeess Direct, so the customers can contact us, either through digital ways or over the telephone. This addresses the concern for elderly people who are not digitally active but can phone and do all standard bank transactions. Also, we have video conference interaction with clients over the Spuerkeess Direct.

The next step of digitization is rethinking the operating model of the bank. Do we want to have some platform operations rather than traditional ways of working? These are things we are contemplating doing as the next steps.


You recently made the news with the announcement that you would increase your capital share in the Luxembourg Stock Exchange to just over 25%. What is the significance of this move and how does it reflect your strategies and intentions over the medium to long term?

Spuerkeess is first a bank but it’s also a central player in the Luxembourgish economic ecosystem. We are a shareholder in many important areas of Luxembourgish industry, both on the financial side and on the non-financial side. The Luxembourg Stock Exchange is a very important actor in Luxembourg. We were already shareholder with more than 22 percent. Now it turned out that one of our co-shareholders decided to slightly disinvest, and, together with the Luxembourg State, we thought that it would be a good idea to take over that additional shareholding, showing that we really believe that the Luxembourg Stock Exchange is a central actor and that it also has very good chances of further development because it has two areas which are quite unique, the green exchange and also financial data management. These two axes of development are extremely promising also for banks. That’s why, together with the state, we believe it would be a positive signal to show our support to the stock exchange by increasing our holdings.


It’s interesting. You are saying you are a conservative bank and at the same time the State of Luxembourg is known now to be growing into new and innovative sectors. Let’s talk about AI and Fintech. These are non-conservative and maybe high-risk sectors. How do you balance your engagement with the growth and innovation of Luxembourg and the spirit of the bank?

The conservative risk profile does not at all contradict the fact that you want to invest into new technologies. As a bank we are investing in fintech, in AI, and we have many projects running on this side. We are not adverse from investing into space activities. When we invested in SES and in Cargolux, these were risky and new activities too. No one knew what would come out of that. Today, they are world leaders in their sectors.

Our role as a central economic player in Luxembourg is to take some industrial risk and to accompany new sectors of the Luxembourgish economy, knowing that maybe not everything will be a huge success. But that’s not the type of risk I’m speaking about when I speak about rating. The type of risk we want to avoid is financial risk and compliance risk. We do not avoid entrepreneurial risk.


How about research?

We have several projects of cooperation, also some with the University of Luxembourg, where we sponsor projects in blockchain, in AI and also some that are likely to turn into something you can really use in the practical life at the bank. We are pretty active. We are also members of the Luxembourg House of Fintech, the LHoFT, where we also see whether there are interesting new initiatives that we can use in order to improve our activity at the bank. We even have a special department within the bank which is completely dedicated to innovation.


What would you tell investors that are looking at the geographic region of Central Europe? What would you tell them about Luxembourg? Why should they invest in Luxembourg?

Luxembourg is a very open country from the cultural point of view. We speak many languages. Everyone speaks three, and many people speak four or five. The culture is very cosmopolitan, especially in Luxembourg City where 77% of the residents are non-Luxembourgers. We also have well-trained people. We are open to research in many modern areas. Luxembourg is mainly known for banking, but we have other activities in the economy. So the whole ecosystem is very developed. The quality of life is very good. Also, the ways are short, both in terms of distance, but also when you want to speak to decision-takers, you usually reach them quite quickly; people tend to be not very formalistic. All these values contribute to be welcoming.


What would be your final comments to our readers of Newsweek and how do you see the future of Spuerkeess coming?

We live an extremely challenging but interesting moment in history. The role is to prepare the future. We can rely on more than 160 years of tradition. This is a huge chance, but it is also an encouragement because, with all that history, the bank had to master difficulties and challenges and we have always managed to improve out of the challenge. I believe that we will be able to do so in the future. The essential thing is that we want to attract and to keep the right talents. That, and we have to be able to recognize on time what customers’ demands and needs are. We have to be proactive in that, however not too proactive because you have to do what your customers want you to do. You cannot say: I will become completely automatized or digital or just a platform, but my customers will be left behind. When we speak about customers centricity, it is one of the main principles of our new strategic plan. It means being close to the customers in terms of products, services, but it also means that we have to proactively sense how customers’ needs and preferences evolve over time. And again, as customers trust us, we have a unique situation to achieve that. So, user experience is very important.