Liechtenstein is among eleven countries worldwide with an AAA rating. On June 2018, Standard & Poor’s (S&P) reconfirmed its best rating for the country’s creditworthiness. Liechtenstein has no national debt, instead it has large reserves thanks to strict budgetary discipline. A functioning banking sector and stable financial centre with strong international connections contribute substantially to the financial results of the state.
The financial services sector, accounting for around 25 per cent of GDP, is the most important sector in the Liechtenstein economy after industry. The banks are characterised by a high level of financial stability. Having a sufficiently high-quality equity base at its disposal is part of the LLB Group’s identity. We meet the core capital ratio of 13 per cent required under Basel III regulations at the latest from 2019 onwards and have done so for many years (see chapter “Finance and risk management”).
The LLB Group bases its business policy on market principles and strives to generate a reasonable profit. The Principality of Liechtenstein and its population participate in profits through regular distributions. The economic contribution of the LLB Group – dividends, direct taxes and the compensation payment for the state guarantee – amounted to CHF 45.5 million in 2018 (2017: CHF 46.4 million). LLB receives no financial support for its banks or Group companies in Liechtenstein, Switzerland and Austria from any government.
LLB is the only bank in Liechtenstein which carries a state guarantee for savings account deposits and medium-term notes (cash bonds). This is regulated in the Law on the Liechtensteinische Landesbank of 21 October 1992. According to Article 5, the Principality of Liechtenstein is liable for savings account deposits at the Landesbank and for medium-term notes (cash bonds) of the Landesbank, insofar as the bank’s own resources are not sufficient. For this additional security, from which our clients benefit, LLB makes a yearly compensation payment to the Principality. In 2018, this amounted to CHF 0.9 million (2017: CHF 1.1 million). The corresponding agreement on the state guarantee expires at the end of July 2020. The Landtag, Liechtenstein’s Parliament, has decided, in agreement with the LLB management, not to renew it. The state guarantee is considered to be outdated and no longer corresponds to EEA requirements. As a bank of systemic importance, LLB is subject to particularly strict financial market regulation and high capital adequacy requirements. With the implementation of the Capital Requirements Directive (CRD IV) and the establishment of the Deposit Guarantee and Investor Compensation Foundation (EAS), Liechtenstein has a modern guarantee system, which guarantees an adequate equity base and protection of client deposits (see chapter “Regulatory framework and developments”).