2022 Cross-Border Investment Trends In EU/EEA: Spotlight On Cyprus

A comprehensive data analysis conducted by the European Securities and Markets Authority (ESMA), the EUs financial markets regulator, and national competent authorities (NCAs), sheds light on the state of cross-border provision of investment services in 2022. The study evaluated data from 29 jurisdictions, revealing notable trends in the realm of retail investment.

As per the data, around 380 firms were engaged in providing services to retail clients on a cross-border basis in 2022, with investment firms constituting the majority (59%), and credit institutions forming the remaining 41%. These firms serve an expansive network of around 7.6 million clients across the EU/EEA, a testimony to the growing importance of cross-border investment services.

The study also brought to the forefront the crucial role played by Cyprus in the cross-border investment sector. As per the collected data, Cyprus emerged as the primary location for firms providing cross-border investment services in the EU/EEA, accounting for a significant 23% of the total firms passporting investment services. Following closely were Luxembourg and Germany, accounting for 16% and 13% of all firms, respectively.

When it comes to EU/EEA retail clients, more than 75% received their cross-border investment services from firms based in Cyprus, Germany, and Sweden. The clients being catered to by Cyprus-based firms was around 2.5 million, German-based firms served approximately 2 million, while Swedish firms provided services to more than 1 million retail clients.

Notably, all other firms combined reported a total of around 1.8 million cross-border retail clients, representing a quarter of the total number of retail clients.

The study also provided insights into the average number of cross-border retail clients per firm, ranging from as low as 189 in Italy to about 140,000 for the eight firms based in Sweden. On average, firms had around 19,000 retail clients.

Germany, Spain, France, and Italy surfaced as the most significant destinations for investment firms providing cross-border services, as reflected in the number of retail clients served in these regions.

Despite the robust growth in cross-border investment services, firms recorded approximately 5,700 complaints in 2022. Complaints were mainly regarding the terms of the contract, fees, charges, and issues related to general administration or customer services. Interestingly, complaints regarding unsuitable investment products and market events were fewer.

ESMA aims to continue the data collection exercise annually to provide a clearer picture of the evolving trends in cross-border investment services. The next report detailing these findings is expected in 2024.

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