Strictly Regulatory

Claude Marx, director of the CSSF, Luxembourg's financial sector supervisory body, has clarified that the decision not to extend authorisation for the sale of Israeli government bonds in the European Union after August 31 was based on European regulation, not political considerations.[1]

The explanation is technical. Bonds issued by a third state must be domiciled in a European country. Israel chose Ireland as its home EU country. It then requested an exception, asking Luxembourg to validate its prospectus in accordance with EU prospectus rules for a limited time. This arrangement was always intended to last only 12 months, because the rule is that the home country choice is final. The 12 months are up.[1]

Marx emphasised that the CSSF is "not there to make rules. It is there to apply rules," underlining the regulator's role as a technical supervisor rather than a political decision-maker. He confirmed that neither the Ministry of Finance nor the Ministry of Foreign Affairs issued any new instructions or guidance, despite recent political developments and statements by Foreign Minister Xavier Bettel concerning Israel.[1]

Two Scenarios

Marx was asked whether the authorisation of Israeli government bonds could truly be viewed as a purely technical administrative act, given the geopolitical situation and ongoing international criticism of Israel's conduct. He explained that the CSSF would only refuse to distribute state securities in two scenarios: if the state is under a sanctions regime, or if there is a definitive conviction by the International Criminal Court for, for instance, genocide. Neither is the case today.[1]

Reputation

When asked whether the episode had damaged Luxembourg's reputation, Marx admitted it perhaps hurt "because of the way certain things were presented," but insisted that neither the government nor the CSSF should reproach themselves for anything. The CSSF merely fulfils its administrative duties.[1]

Marx noted that Luxembourg is a state governed by the rule of law, which is what its decision to distribute securities is based on. He also addressed EU plans for more centralised financial supervision, saying Luxembourg is not opposed to central oversight "where it makes sense," but warned that centralising all financial product oversight creates longer delays before products reach the market.[1]

This morning, Finance Minister Roth said the CSSF decided two months ago. Now the CSSF director says it was a 12-month arrangement that simply expired. Both are true: the arrangement was always time-limited, and the CSSF decided two months ago not to extend it. The Amnesty protest happened yesterday. The expiration was always going to happen on August 31. The question of whether the public announcement was accelerated by political pressure remains open. The CSSF says no. The calendar says maybe.[1]