Banque de Luxembourg

Banque de Luxembourg expands the reach of its structured products business with LexiFi Apropos


In January 2011, Banque de Luxembourg and LexiFi teamed up to strengthen the Bank's structured products business. Presented with the opportunity to expand its advisory role and distribution reach, the Bank decided to implement new processes and tools for creating and managing structured investment solutions. With a central system in place, based on LexiFi Apropos, the Bank intensified pre and after-sale service and simplified daily activities through extensive automation.

Client presentation

Founded in 1920, Banque de Luxembourg is one of the most important financial institutions in Luxembourg. With decisions made locally, it offers its independent wealth management expertise to clients based in Luxembourg and the rest of Europe.

Banque de Luxembourg is a subsidiary of Crédit Mutuel-CIC Group, a major European financial services firm with 65,000 employees providing banking and insurance services to 18.7 million customers. Crédit Mutuel-CIC Group is the second largest retail bank in France.

Banque de Luxembourg has developed a sizeable structured products advisory business, serving both in-house private banking clients and professional clients, including asset managers, family offices, and intermediaries.

More recently, Banque de Luxembourg was mandated to act as the main advisory center for equity and commodity derivatives for private banking clients within the Crédit Mutuel-CIC Group. In this capacity, Banque de Luxembourg assists its parent company in issuing equity and commodity-linked notes and distributes such products group-wide to private banking clients. The group's private banking division comprises CIC Banque Privée, Banque CIC (Suisse), Banque Pasche, CIC Banque Transatlantique and CIC's subsidiary in Singapore.

The challenges of managing structured investment products

Presented with the double opportunity of a growing advisory business and expanded responsibilities within the Crédit Mutuel-CIC Group, Banque de Luxembourg concluded that it needed to adopt new processes and tools for creating and managing structured investment solutions. The goal was to develop consistent valuation, analysis, and processing capabilities in order to handle an increasingly diverse product portfolio, diversity being measured both in terms of payoff structure and type or combination of underlying assets.

Addressing these challenges with LexiFi

Banque de Luxembourg teamed up with LexiFi to address the challenges facing its structured products advisory desk. The Bank reengineered its internal and client-facing processes.

  1. Getting the data together

    A new central database for structured products was created. It allows advisory desk and risk management staff to access complete product definitions, comprising economic terms and conditions and myriad additional data elements used to support internal processes and communication with clients. For example, Banque de Luxembourg stores sales volumes by channel; funding sources and levels; and documents created either in-house or by third parties. The central database is accessible programmatically to create reports and customer documents.

  2. Offering the right products

    Banque de Luxembourg emphasizes tailored solutions as opposed to campaign products. The advisory desk must ascertain that proposed products are aligned with each investor's objectives, fully understood by clients, and fairly priced. LexiFi Apropos' structuring tools enable users to clearly communicate potential risks and rewards to clients. The system's document production feature facilitates the creation and distribution of informative term sheets. In addition, users rely on the system's accurate pricing tools to control and possibly challenge quotes provided by investment banks.

  3. Building long-term client relationships

    Banque de Luxembourg advises investors and intermediaries throughout the life of each product. To achieve this, the Bank tracks the performance of products and underlying assets; verifies that counterparty prices match internally calculated prices; and monitors life cycle events. Advisory desk members have used LexiFi Apropos' interactive reporting tool to create a collection of displays that produce alerts when salient conditions are met. The Bank communicates the information to clients through dynamic product reports that present performance metrics in both graphical and tabular forms, list all events that have affected the product, and describe the current, potentially adjusted (e.g., after an equity corporate action) economic terms of the contract.

  4. Pricing and managing risk independently

    Banque de Luxembourg quotes secondary market prices directly to clients. In most cases, investment banks are not solicited in this process. Secondary market activities also require independent risk management capabilities as the Bank maintains and hedges a product inventory to enable secondary market purchases by customers.

  5. Streamlining operations

    Banque de Luxembourg has automated the management of contract events, the ongoing valuation of products, and the production of reports and customer documents. LexiFi Apropos detects and processes life cycle events such as payments, fixings, option expiries, barrier crossings, and equity corporate actions. To enable the ongoing valuation of the entire product portfolio, users attach a default pricing environment to each product, comprising a pricing model, pricing parameters, and market data filtering and transformation rules.

  6. The combined use of automated event processing and pricing capabilities has drastically simplified the daily activities of the advisory desk: when compared with the previous spreadsheet solution, LexiFi Apropos considerably reduced the number of manual tasks and brought consistency and speed by automating the production and distribution of up-to-date term sheets and product reports.

The client experience in working with LexiFi

The joint work between Banque de Luxembourg and LexiFi has been extremely productive. It took less than one month to train users and deploy LexiFi Apropos for productive use.

According to Pierre Stoll, Head of Structured Products at Banque de Luxembourg, "LexiFi more than delivered on its promise: LexiFi Apropos is a very well-designed system that continues to positively surprise us as we encounter new business challenges. LexiFi's staff is competent and has a sincere desire to make the relationship succeed."

Client Spotlight

"LexiFi more than delivered on its promise: LexiFi Apropos is a very well-designed system that continues to positively surprise us as we encounter new business challenges. LexiFi's staff is competent and has a sincere desire to make the relationship succeed."

Pierre Stoll
Head of Structured Products
Banque de Luxembourg

Banque de Luxembourg