National and Global Islamic Financial Architecture:
Problems and Possible Solutions for the OIC Member Countries
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Luxembourg's institute for training in banking (Institut de formation bancaire Luxembourg)
offers both a foundation certificate and an advanced diploma in Islamic finance, and the
Luxembourg financial services supervisor (Commission de Surveillance du Secteur Financier,
CSSF) has signed a number of co-operation agreements with its counterparts in jurisdictions
with a strong Islamic finance interest.
There are currently no Takaful products offered in Luxembourg, though FWU, which has been
discussed in the context of Germany, has a long-standing operation there.
As already mentioned, Luxembourg operates within a financial services regulatory framework
set dominantly at the European level. As Luxembourg's own brochure says, referring to
Islamic funds, “The CSSF does not place any conditions on a fund with regard to the
compatibility of its investments with Shariah law. From a regulatory perspective, the CSSF will
seek to ensure that all applicable Luxembourg legal requirements are complied with, that the
persons involved in the management of a fund have adequate expertise and that the sales
documentation is sufficiently clear to allow investors to understand the consequences of their
investment.” (LfF 2014) In other words – and private sources have confirmed that the same is
true of sukuk – the Luxembourg approach is to make no special provisions for Islamic finance
within its financial services regulation, but to apply the frameworks flexibly, particularly in
respect of disclosure, to ensure that the disclosures that would be required by a religiously-
sensitive investor are made.
The architectural institutions related to Islamic finance in Luxembourg are summarized below:
Legal infrastructure
Luxembourg has published tax guidelines which establish tax neutrality for Islamic finance
vehicles, notably sukuk, in relation to conventional counterparts. Otherwise there have been
no amendments to the legal infrastructure.
Financial System Regulation and Supervision Framework
No changes have been made to the financial system regulatory framework which is, in any
event, largely determined at European level. Luxembourg does, however, make a point of
applying it flexibly, using general provisions to require disclosures about such things as
Shari’ah governance.
Shariah Governance Framework
Luxunbourg does not have any national Shari’ah governance arrangements nor mandate any
form of governance in forms.
Liquidity Infrastructure
There is currently no Islamic bank in Luxembourg, and this issue has therefore not arisen.
Information Infrastructure and Transparency
Luxembourg uses IFRS, and has made no amendments to accommodate Islamic finance.
There is no credit rating agency based in Luxembourg, though the major international agencies
are active. While some of these have rating methodologies for Islamic institutions, there have
been no Luxembourg-specific developments.