Cyprus had highest concentration of firms with cross-border investment activity in 2023

Cyprus had the highest concentration of firms with cross-border investment activity in the EU/EEA region in 2023, being host to 20% of all firms.

Indeed, Cyprus along with Luxembourg (15%) and Germany (14%) accounted for almost half of EU/EAA firms (192 of all 386 firms).

On the other hand, firms based in Germany (35%) and Cyprus (24%) received the majority of complaints pertaining to cross-border investment services in 2023.

The figures are cited in the European Securities and Markets Authority’s (ESMA) “Report On the 2023 Cross-border Provision of Investment Services to Retail Clients in the EU and EEA”.

This is ESMA’s second such report, the first conducted in 2023 for the year 2022, as it said its Board of Supervisors decided to continue issuing it on an annual basis.

The collection and analysis of data was carried out by ESMA and national competent authorities (NCAs). As ESMA said, “The Report endeavours to mirror the state of cross-border investment services in the EU/EEA, with particular focus on the analysis of firms’ retail clients and complaints data across the EU/EEA, as well as for each Member State on a home-host basis. These are key pieces of information which are necessary to carry out NCAs’ supervisory mandate on firms’ cross-border activities. The results ultimately enhance our understanding of the state of play of cross-border investment services towards retail clients in the EU/EEA in accordance with MiFID II and constitute a first necessary evidence base for more effective monitoring of financial markets, with particular emphasis on the investor protection objective of NCAs and ESMA”.

It added that the report aims to provide a detailed analysis of the cross-border activity of passported firms across the EU and EEA Member States for the 2023 reference year. The Report does not include data on the provision of services by firms in their Home Member State.

Analysing the results of the 2023 data, the Report found that:

• The European market for cross-border provision of investment services in 2023 comprised 386 firms across 30 EU/EEA Member States providing services to about 8 million retail clients in other Member States. Firms also reported to have received a total of about 7,500 complaints from cross-border retail clients.
• Compared to 2022, the cross-border market for investment services in the EU/EEA formally grew by 1.6% in terms of firm numbers, by 5% in terms of retail clients’ number, while the number of complaints increased by 31%.
• A relatively high concentration of firms with cross-border investment activity in a few EU countries was observed, with three (3) countries being home to about half the 3 number of EU/EEA firms (192 of all 386 firms): Cyprus (20%), Luxembourg (15%), Germany (14%). While accounting for 37% of the total firm number, four (4) jurisdictions (CY, LT, DE, IE) are home to firms that provide cross-border investment services to 76% of EU/EEA retail clients.
• Three (3) jurisdictions reported no firms with cross-border activity (HR, RO, SI), while seventeen (17) other jurisdictions reported less than ten (10) firms with cross-border activity (1-9 firms each).
• Twenty-one (21) Member States are home to firms providing cross-border investment services to retail clients in a rather large number of host Member States (10 or more). Firms based in Cyprus, Germany, Austria, the Netherlands, Ireland, and Lithuania reported that their firms provide services to retail clients in all other Member States.
• Similar to 2022, investment firms dominate the market for cross-border provision of investment services (56% investment firms versus 44% credit institutions).
• 72% of all investment firms engaged in cross-border activity (155 out of 216) are based in 6 Member States (CY, LU, NL, DE, MT, SE). Meanwhile, 80% of all credit institutions (136 out of 170) are based in 5 Member States (DE, LU, FR, AT, BE).
• The four (4) most important destinations of investment services cumulatively account for 53% of the total number of retail clients: DE (1.6 million clients), FR (1 million clients), ES (827 thousand clients) and IT (728 thousand clients).
• Τhe average number of cross-border clients per firm is about 20,700 clients. Four jurisdictions (LT, IE, HU, LV) reported on average more than 60,000 clients per firm, while accounting for only 4% of all EU/EEA firms with cross-border activity.
• Countries with significant cross-border activity also recorded higher numbers of complaints. Firms based in Germany (35%) and Cyprus (24%) received the majority of complaints pertaining to cross-border investment services in 2023.

Read the full report here