Private banking
Private banking is banking, investment and other financial services provided by banks to private individuals investing sizable assets. The term "private" refers to the customer service being rendered on a more personal basis than in mass-market retail banking, usually via dedicated bank advisers. It should not be confused with a private bank, which is simply a non-incorporated banking institution.
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[edit] Overview
Historically private banking has been viewed as very exclusive, only catering for high net worth individuals with liquidity over $2 million, although it is now possible to open some private banking accounts with as little as $250,000 for private investors.[1] An institution's private banking division will provide various services such as wealth management, savings, inheritance and tax planning for their clients. A high-level form of private banking (for the especially affluent) is often referred to as wealth management. For private banking services clients pay either based on the number of transactions, the annual portfolio performance or a "flat-fee", usually calculated as a yearly percentage of the total investment amount.[2]
The word "private" also alludes to bank secrecy and minimizing taxes through careful allocation of assets or by hiding assets from the taxing authorities. Swiss and certain offshore banks have been criticized for such cooperation with individuals practicing tax evasion. Although tax fraud is a criminal offense in Switzerland, tax evasion is only a civil offence, not requiring banks to notify taxing authorities.[3]
Historically, private banking has developed in Europe (see The list of private banks). Some banks in Europe are known for managing assets of some royal families. The assets of Princely Family of Liechtenstein is managed by LGT Bank (founded in 1920). The assets of Dutch royal family is managed by MeesPierson (founded in 1720). The assets of British Royal Family is managed by Coutts (founded in 1692).
In Switzerland, there are many banks providing private banking service.[4] From Congress of Vienna in 1815 Switzerland has remained neutral including the time of two World Wars. After World War I, the former nobles of Austro-Hungarian Empire moved their assets to Switzerland for fear of confiscation by new governments.[5] During World War II, many wealthy people, including Jewish families and institutions, moved their assets into Switzerland to protect them from Nazi Germany. However, this transfer of wealth into Switzerland had mixed and controversial results, as beneficiaries had difficulties retrieving their assets after the war.[6] After World War II, in east Europe, assets were again moved into Switzerland for fear of confiscation by communistic governments. For the history, Switzerland is trusted for offshore center in Europe. Today, Switzerland remains the largest offshore center, with about 27 percent ($2.0 trillion) of global offshore wealth in 2009, according to Boston Consulting Group.[7] (Offshore wealth is defined as assets booked in a country where the investor has no legal residence or tax domicile)
In England, some private banks were established in 17th century. In these days, the capitalism based on agriculture had developed there. So some financial institutes that managed the assetes of gentries and novelmen developed into private banks. Gradually, private banks in England had managed the asstes of royal family and the riches who escaped from French revolution. Then the private banks had played the role as the family doctors for finance of various riches.
United States is one of the largest countries in the scale of private banking because the high number of wealthy people who live in the United States, with its 3.1 million HNWIs accounting for 28.6% of the global High net worth individual population in 2010, according to the co-research of Capgemini and Merrill Lynch.[8] Some American banks that specialize in private banking date back to 19th century, such as U.S. Trust (founded in 1812) and Northern Trust (founded in 1889).
[edit] Scale
The twenty largest global private banking branch in 2011 (listed by assets under management):[9]
| Rank | Bank | AUM ($bn) |
|---|---|---|
| 1. | Bank of America Merrill Lynch | $1,944.74 |
| 2. | Morgan Stanley Smith Barney | $1,628.00 |
| 3. | UBS | $1,559.90 |
| 4. | Wells Fargo | $1,398.00 |
| 5. | Credit Suisse | $865.06 |
| 6. | Royal Bank of Canada | $435.15 |
| 7. | HSBC | $390.00 |
| 8 . | Deutsche Bank | $368.55 |
| 9 . | BNP Paribas | $340.41 |
| 10. | JP Morgan Chase | $284.00 |
| 11. | Pictet | $267.66 |
| 12 . | Goldman Sachs | $229.00 |
| 13 . | ABN AMRO | $220.06 |
| 14 . | Barclays | $185.91 |
| 15 . | Julius Bär | $181.68 |
| 16. | Crédit Agricole | $171.81 |
| 17 . | Bank of New York Mellon | $166.00 |
| 18 . | Northern Trust | $154.40 |
| 19 . | Lombard Odier Darier Hentsch | $153.10 |
| 20 . | Citigroup | $140.70 |
In the list, there are five Swiss companies including two private banks and eight American companies.
[edit] See also
- Wealth management
- Private bank
- Family office
- Multi family office
- Bank secrecy
- Offshore bank
- Swiss bank
[edit] References
- ^ Private Banks: Would you like to be introduced to one?, August 9th 2011
- ^ Understanding Cost Drivers and Pricing Models in Wealth Management, MyPrivateBanking Research, June 15, 2009
- ^ Whitlock, Craig. "Swiss Talk Tough In Banking Battle: Blacklist Threat Looms Over Tax Havens" Washington Post, Sunday, March 29, 2009; Page A07.
- ^ Swiss Banks Buck Secrecy Squeeze With $53 Billion of Inflows
- ^ The Swiss banks by T. R. Fehrenbach
- ^ Hitler's Secret Bankers by Adam Lebor
- ^ The Offshore Business Has Recovered—but Challenges Remain
- ^ World Wealth Report 2011
- ^ Scorpio Partnership: The Global Private Banking Benchmark 2011 Top 20
[edit] External links
- Businessweek: In the Battle of the Big Brokers, Merrill Is Winning
- Private Banker International - news, data, analysis and business information for the private banking industry: Privatebankerinternational.com
- Regaining momentum in wealth management, Roland Berger Strategy Consultants [1]
