Private banking
Encyclopedia
Private banking is bank
ing, 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.
s 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. 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.
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 bank
s 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.
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. 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. 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. 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
. (Offshore wealth is defined as assets booked in a country where the investor has no legal residence or tax domicile)
United States is one of the largest countries in the scale of private banking because a lot of wealthy people live in 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
. 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).
(listed by assets under management
):
In the list, there are five Swiss companies including two private bank
s and eight American companies.
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
ing, investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
and other financial services
Financial services
Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...
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
Retail banking
Retail banking is banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings and transactional accounts, mortgages, personal loans, debit cards, credit cards, and so forth.-Types of...
, usually via dedicated bank advisers. It should not be confused with a private bank
Private bank
Private banks are banks that are not incorporated. A private bank is owned by either an individual or a general partner with limited partner...
, which is simply a non-incorporated banking institution.
Overview
Historically private banking has been viewed as very exclusive, only catering for high net worth individualHigh net worth individual
A high-net-worth individual is a person with a high net worth. In the private banking business, these individuals typically are defined as having investable assets in excess of US$1 million. As explained below, the U.S...
s 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. 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
Wealth management
Wealth management is an investment advisory discipline that incorporates financial planning, investment portfolio management and a number of aggregated financial services...
. 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.
The word "private" also alludes to bank secrecy
Bank secrecy
Bank secrecy is a legal principle in some jurisdictions under which banks are not allowed to provide to authorities personal and account information about their customers unless certain conditions apply...
and minimizing taxes through careful allocation of assets or by hiding assets from the taxing authorities. Swiss and certain offshore bank
Offshore bank
An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction that provides financial and legal advantages. These advantages typically include:...
s 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
Civil law (common law)
Civil law, as opposed to criminal law, is the branch of law dealing with disputes between individuals or organizations, in which compensation may be awarded to the victim...
, not requiring banks to notify taxing authorities.
Historically, private banking has developed in Europe (see The list of private banks
Private bank
Private banks are banks that are not incorporated. A private bank is owned by either an individual or a general partner with limited partner...
). Some banks in Europe are known for managing assets of some royal families. The assets of Princely Family of Liechtenstein
Princely Family of Liechtenstein
The Liechtenstein dynasty, from which the principality takes its name, is the family which reigns by constitutional, hereditary right over the nation 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
British Royal Family
The British Royal Family is the group of close relatives of the monarch of the United Kingdom. The term is also commonly applied to the same group of people as the relations of the monarch in her or his role as sovereign of any of the other Commonwealth realms, thus sometimes at variance with...
is managed by Coutts
Coutts
Coutts & Co. is one of the UK's private banking houses, now wholly owned by the Royal Bank of Scotland . RBS acquired Coutts and all of its overseas subsidiaries when it bought NatWest. On 1 January 2008, Coutts' international businesses were renamed RBS Coutts, aligning them more closely with...
(founded in 1692).
In Switzerland, there are many banks providing private banking service. From Congress of Vienna
Congress of Vienna
The Congress of Vienna was a conference of ambassadors of European states chaired by Klemens Wenzel von Metternich, and held in Vienna from September, 1814 to June, 1815. The objective of the Congress was to settle the many issues arising from the French Revolutionary Wars, the Napoleonic Wars,...
in 1815 Switzerland has remained neutral including the time of two World Wars. After World War I, the former nobles of Austro-Hungarian Empire
Austria-Hungary
Austria-Hungary , more formally known as the Kingdoms and Lands Represented in the Imperial Council and the Lands of the Holy Hungarian Crown of Saint Stephen, was a constitutional monarchic union between the crowns of the Austrian Empire and the Kingdom of Hungary in...
moved their assets to Switzerland for fear of confiscation by new governments. 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. 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
Boston Consulting Group
The Boston Consulting Group is a global management consulting firm with offices in 42 countries. It is recognized as one of the most prestigious management consulting firms in the world. It is one of only three companies to appear in the top 15 of Fortunes "Best Companies to Work For" report for...
. (Offshore wealth is defined as assets booked in a country where the investor has no legal residence or tax domicile)
United States is one of the largest countries in the scale of private banking because a lot of wealthy people live in United States, with its 3.1 million HNWIs accounting for 28.6% of the global High net worth individual
High net worth individual
A high-net-worth individual is a person with a high net worth. In the private banking business, these individuals typically are defined as having investable assets in excess of US$1 million. As explained below, the U.S...
population in 2010, according to the co-research of Capgemini
Capgemini
Capgemini is a French global IT services company, one of the world's largest management consulting, outsourcing and professional services companies with a staff of 114,274 operating in 40 countries. It is headquartered in Paris and was founded in 1967 by Serge Kampf, the current chairman, in...
and Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
. Some American banks that specialize in private banking date back to 19th century, such as U.S. Trust
U.S. Trust Corporation
United States Trust Corporation is an American bank holding company based in New York, NY. It is the oldest trust company in the U.S., and provides personal wealth management to some of the wealthiest individuals and families.-History:...
(founded in 1812) and Northern Trust
Northern Trust
Northern Trust Corporation is an international financial services company headquartered in Chicago, Illinois, USA. It provides investment management, asset and fund administration, fiduciary and banking services through a network of 85 offices in 18 U.S. states and 12 international offices in North...
(founded in 1889).
Scale
The twenty largest global private banking branch in 2011(listed by assets under management
Assets under management
Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition...
):
| Rank | Bank | AUM ($bn) |
|---|---|---|
| 1. | Bank of America Merrill Lynch Bank of America Merrill Lynch Bank of America Merrill Lynch is the corporate and investment banking division of Bank of America. It provides services in mergers and acquisitions, equity and debt capital markets, lending, trading, risk management, research, and liquidity and payments management... |
$1,944.74 |
| 2. | Morgan Stanley Smith Barney | $1,628.00 |
| 3. | UBS | $1,559.90 |
| 4. | Wells Fargo Wells Fargo Wells Fargo & Company is an American multinational diversified financial services company with operations around the world. Wells Fargo is the fourth largest bank in the U.S. by assets and the largest bank by market capitalization. Wells Fargo is the second largest bank in deposits, home... |
$1,398.00 |
| 5. | Credit Suisse Credit Suisse The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:... |
$865.06 |
| 6. | Royal Bank of Canada Royal Bank of Canada The Royal Bank of Canada or RBC Financial Group is the largest financial institution in Canada, as measured by deposits, revenues, and market capitalization. The bank serves seventeen million clients and has 80,100 employees worldwide. The company corporate headquarters are located in Toronto,... |
$435.15 |
| 7. | HSBC HSBC HSBC Holdings plc is a global banking and financial services company headquartered in Canary Wharf, London, United Kingdom. it is the world's second-largest banking and financial services group and second-largest public company according to a composite measure by Forbes magazine... |
$390.00 |
| 8 . | Deutsche Bank Deutsche Bank Deutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets... |
$368.55 |
| 9 . | BNP Paribas BNP Paribas BNP Paribas S.A. is a global banking group, headquartered in Paris, with its second global headquarters in London. In October 2010 BNP Paribas was ranked by Bloomberg and Forbes as the largest bank and largest company in the world by assets with over $3.1 trillion. It was formed through the merger... |
$340.41 |
| 10. | JP Morgan Chase | $284.00 |
| 11. | Pictet Pictet & Cie -Pictet & Cie, Private Bankers, Geneva, Switzerland:Founded in 1805 in Geneva, Pictet & Cie is today one of Switzerland's largest private banks, and one of the premier independent asset management specialists in Europe... |
$267.66 |
| 12 . | Goldman Sachs Goldman Sachs The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients... |
$229.00 |
| 13 . | ABN AMRO ABN AMRO ABN AMRO Bank N.V. is a Dutch state-owned bank with headquarters in Amsterdam. It was re-established, in its current form, in 2009 following the acquisition and break up of ABN AMRO Group by a banking consortium consisting of Royal Bank of Scotland Group, Santander and Fortis... |
$220.06 |
| 14 . | Barclays | $185.91 |
| 15 . | Julius Bär Julius Baer Group Julius Bär Group is a Swiss banking firm which is the parent company of Bank Julius Bär, a traditional private bank based in Zurich, Switzerland. The firm dates itself back to the year 1890, when an exchange office was founded by Ludwig Hirschhorn und Theodor Grob. Joseph Michael Uhl and Julius... |
$181.68 |
| 16. | Crédit Agricole Crédit Agricole Crédit Agricole S.A. is the largest retail banking group in France, second largest in Europe and the eighth largest in the world by Tier 1 capital according to The Banker magazine. It is also part of the CAC 40 stock market index.... |
$171.81 |
| 17 . | Bank of New York Mellon | $166.00 |
| 18 . | Northern Trust Northern Trust Northern Trust Corporation is an international financial services company headquartered in Chicago, Illinois, USA. It provides investment management, asset and fund administration, fiduciary and banking services through a network of 85 offices in 18 U.S. states and 12 international offices in North... |
$154.40 |
| 19 . | Lombard Odier Darier Hentsch | $153.10 |
| 20 . | Citigroup Citigroup Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate... |
$140.70 |
In the list, there are five Swiss companies including two private bank
Private bank
Private banks are banks that are not incorporated. A private bank is owned by either an individual or a general partner with limited partner...
s and eight American companies.
See also
- Wealth managementWealth managementWealth management is an investment advisory discipline that incorporates financial planning, investment portfolio management and a number of aggregated financial services...
- Private bankPrivate bankPrivate banks are banks that are not incorporated. A private bank is owned by either an individual or a general partner with limited partner...
- Family officeFamily officeA family office is a private company that manages investments and trusts for a single wealthy family. The company's financial capital is the family's own wealth, often accumulated over many family generations. Traditional family offices provide personal services such as managing household staff and...
- Multi family officeMulti family officeA Multi-family office is usually an independent organization that supports multiple families to manage their entire wealth.- Definition :...
- Bank secrecyBank secrecyBank secrecy is a legal principle in some jurisdictions under which banks are not allowed to provide to authorities personal and account information about their customers unless certain conditions apply...
- Offshore bankOffshore bankAn offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction that provides financial and legal advantages. These advantages typically include:...
- Swiss bank
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 http://www.rolandberger.com/media/pdf/Roland_Berger_Wealth_management_Long_20090302.pdf