Cyprus firms dominate EU cross-border investment market
Cyprus was the leading EU base for firms providing cross-border investment services to retail clients during 2024, according to the European Securities and Markets Authority (ESMA).
This followed an analysis of the reported year, which was conducted with national regulators, in order to strengthen supervision and investor protection across the EU and EEA.
The study examined data from investment firms and credit institutions operating on a freedom to provide services basis across 30 EU and EEA jurisdictions, excluding domestic activity and branch-based operations.
ESMA said the review covered only firms serving more than 50 retail clients in a host member state, aiming to give regulators a clearer picture of cross-border risks, market concentration, and complaints under MiFID II.
The regulator reported that 370 firms provided cross-border investment services in 2024, serving around 10.5 million retail clients across the EU and EEA.
Compared with 2023, the total number of firms fell by 4 per cent, while the number of retail clients rose sharply by 32 per cent.
Complaints linked to cross-border investment services increased by 46 per cent, reaching 10,968 complaints in total during 2024.
ESMA said Cyprus was the primary home jurisdiction for cross-border investment firms, accounting for 21 per cent of all passporting firms, followed by Luxembourg with 15 per cent and Germany with 13 per cent.
In absolute terms, Cyprus was home to 79 firms providing cross-border services in 2024, up from 78 a year earlier, while Luxembourg fell to 55 firms from 59 and Germany declined to 47 firms from 55.
Together, Cyprus, Luxembourg and Germany accounted for about 49 per cent of all cross-border investment firms in the EU and EEA, broadly unchanged from 2023.
ESMA said the cross-border market remained highly concentrated, with firms based in a small number of countries dominating both client numbers and geographic reach.
Cyprus-based firms alone served around 3.6 million cross-border retail clients in 2024, up from 3.4 million in 2023, giving the island the largest share of clients in the EU and EEA.
Lithuania followed with about 2.6 million clients, up sharply from around 1 million a year earlier, while Germany served 2 million clients and Ireland around 939,000 clients.
Taken together, firms based in Cyprus, Lithuania, Germany and Ireland served 86 per cent of all EU and EEA retail clients receiving cross-border investment services in 2024.
By contrast, the remaining 235 firms across 24 member states accounted for just 1.46 million clients, or about 14 per cent of the total.
ESMA said the top five firms by number of cross-border retail clients were based in Lithuania, Cyprus with two firms, Germany and Ireland, each serving between 700,000 and 2.6 million clients.
The average number of cross-border clients per firm across the EU and EEA was about 28,000, although this varied widely by country.
Cyprus was also the largest home jurisdiction for investment firms, hosting 77 investment firms in 2024, up from 76 in 2023.
Across the EU and EEA, investment firms accounted for 59 per cent of all firms providing cross-border services, while credit institutions made up 41 per cent.
France and Germany remained the leading bases for credit institutions, hosting 36 and 34 respectively, although Germany saw a significant decline compared with 2023.
ESMA said around 20 per cent of all firms providing cross-border investment services in 2024 were based in Cyprus, and these firms represented 35 per cent of all EU and EEA investment firms active cross-border.
Cyprus, Austria, Ireland and Lithuania were the only member states where at least one firm reported providing services to retail clients in all 29 other EU and EEA countries.
On average, firms from each member state provided cross-border services to retail clients in 17.5 other countries, highlighting the scale of regulatory coordination required.
Germany, France, Spain and Italy were identified as the most significant destination markets, collectively accounting for 52 per cent of all retail clients receiving cross-border services.
Germany alone accounted for 1.6 million clients, followed by France with 1.5 million, Spain with 1.4 million, and Italy with 1 million.
Italy and Germany were also the countries whose retail clients received services from firms based in the widest range of other jurisdictions, at 25 and 24 countries respectively.
While complaints rose sharply in absolute terms, ESMA said the complaint rate per 100,000 clients increased more modestly, rising from 94 in 2023 to 104 in 2024, an increase of 9.6 per cent.
Germany-based firms received the largest share of complaints, accounting for 45 per cent of all complaints in 2024, or 4,936 cases, up from 35 per cent a year earlier.
Lithuania and Ireland each accounted for 14 per cent of complaints, while Cyprus accounted for 10 per cent, reflecting a decline in its relative share compared with 2023.
ESMA said countries with the largest cross-border activity also tended to record higher complaint volumes, with Germany, Ireland and Lithuania driving most of the growth in 2024.
The regulator said it would continue to carry out the data collection exercise annually, using the findings to support more effective market supervision and investor protection across the EU and EEA.