31 January 2015
Private banking refers to banking, investment and other financial services generally provided by banks to its clients, usually to high-net-worth individuals who enjoy high levels of income or invest sizable assets. "Private" means that products and services provided by the bank are rendered on a more personal basis than in mass-market retail banking, and delivered to the client via dedicated bank advisers. Essentially, private banking is similar to wealth management and asset management; premium banking is usually a subset of private banking services.
Private banking is a process, which starts with defining of a client's investment profile and objectives and elaborating of a proper investment strategy, then executed according to the selected model, with regularly conducted follow-ups and performance reviews.
In general, private banking in provided to high-net-worth individuals, but several banks also offer private banking to institutions.
Deutsche Bank, offers its private banking services to both private clients and their families and insitituions (including public and private pension funds, national and supranational entities, corporations, charities and foundations).
While an individual may be able to conduct some private banking starting with $50,000 or less in investable assets, some exclusive private banks only accept clients with more than $1,000,000 worth of investable assets.
RBS Private Banking is a available to all customers with a sole income of at least £100,000 paid into their RBS account, or minimum outstanding mortgage borrowings with us of £300,000, or savings and investments of at least £100,000 held with RBS.
Focusing on the high end of the market, KBC Private Banking sets a minimum investment threshold to €1,000,000 in investable income.
As mentioned above, "private" refers to providing products and services, tailored to meet investment goals of a particular client. Because investment goals vary substantially among the clients, the banks offer a broad range of private banking products to their clients, for example:
Banks can offer either proprietary products or third-party products. To distinguish between there two options, two types of product platforms are used:
Because of the diversity of clients' investment goals and existing private banking products, a bank can not meet the needs of the clients by offering solely proprietary products. That is why most of the banks now follow an open architecture product platform.
Private banking services can be subdivided into 2 broad categories: asset management and financial advising. Examples of services from each category are shown below:
Private banking is a continuous process of interactions between a client and his/her bank, and this process can be broken down into several phases.
When determining the investment profile and objectives, the bank must understand each client individually: the bank studies the individual situation of a client in detail, looking to understand his/her investment horizons, liquidity needs and the levels of risk he/she is willing to assume. This analysis is reviewed periodically, based on the evolution of the market and of the client's needs.
As far as the bank's role in decision-making and service, there are three private banking models, each guided by the investment profile and designed to meet clients different needs.
The definition of the asset allocation is the fundamental pillar of the investment strategy and guides us to the successful achievement of a client's goals.
This strategic asset allocation is modified, from time to time, according to the market conditions and perspectives.
Access to the most complete selection of financial products is crucial for a successful execution of the investment strategy. At this stage, products offered by the bank are used to implement the client's investment strategy.
At this stage, the bank along with the client, performs a thorough and frequent revision of the client's profile, objectives and results, seeking to keep the investments within the established parameters.
In order to identify possible deviations in the strategic positions from the investment profile, automated monitoring systems may be used.
Furthermore, a client may be offered direct access to his/her positions through a private access site on the Internet, enabling them to view the evolution of their investment strategies, independently of the bank's controls.
Depending on the roles of the bank and the client in decision making when implementing the investment strategy, three models of interaction between the client and the bank exist.
In this model a client delegates management of his/her investments to professional asset managers. The bank, in turn, defines, implements and controls the investment strategy based on the client's profile and objectives.
Decision making is adopted by the bank based on the investment profile of the client.
In portfolio advisory model, a client receives active, frequent advisory services from the bank's specialists. The client can benefit from using this model, when he/she has time and interest to follow the markets.
The bank's role here is in
Decision making is performed by the client with active advisory services of the bank.
A client manages his/her assets directly with one-off advisory services from the bank. The bank suggests investment proposals and provides instruments to help the client select.
Decisions are made by the client based on his/her investment profile.
While private banking is one of the major banking services (along with retail, corporate and investment banking), premium banking is an extension of retail banking services to provide additional convenience and advantages to the bank's clients. Premium banking can provide basic private banking services as well. Several examples of premium banking services from retail and private banking are listed below.
Like private banking, premium banking is usually available to a bank client upon meeting eligibility criteria, however, the criteria for premium banking are less strict than for private banking.
To be eligible to use Barclays premium banking, a client should have an annual gross income paid into a Barclays current account of over £75,000 or have over £100,000 saved or invested with Barclays. Barlcays private banking services are available to clients who wish to establish an investment portfolio of £500,000 and above.
Essentially, private banking and welth management are the same: some banks call their private banking divisions "Wealth Management", "Private Wealth Management" or "Global Wealth Management". Several examples are given below:
|Name||Private Banking Division|
|HSBC||Retail Banking and Wealth Management|
|Deutsche Bank||Deutsche Asset and Wealth Management|
|BNP Paribas||BNP Paribas Wealth Management|
|Barclays||Barclays Wealth and Investment Management|
|UBS||UBS Wealth Management|
In finance, the term asset managent covers broader area than private banking: for exampple, asset management doesn't restrict its clients to wealthy individuals.
Offshore banking refers to providing banking services to a client in jurisdictions where the client doesn't have a tax residence.
Hence, as a part of private banking investment strategy, a bank can offer a client to make offshore investments.
There are several parameters to be considered when choosing a private banking services provided by a particular bank, for example:
Awards in private banking are also can be taken into account.
Several awards exist for private banking. European banks, awarded by PWM/The Banker in 2014 are shown below.
|UBS||Best Global Private Bank, Best Private Bank for Philanthropy Services, Best Global Brand in Private Banking|
|BNP Paribas Wealth Management||Best Private Bank in Europe|
|Erste Bank||Best Private Bank in Central and Eastern Europe, Best Private Bank in Austria|
|KBC Bank||Best Private Bank in Belgium|
|Berenberg Bank||Best Private Bank in Germany|
|UniCredit||Best Private Bank in Italy|
|BNP Paribas||Best Private Bank in France|
|ING (Luxembourg)||Best Private Bank in Luxembourg|
|ING (Netherlands)||Best Private Bank in the Netherlands|
|SEB (Sweden)||Best Private Bank in Sweden|
|SEB (Estonia)||Best Private Bank in the Baltic Countries|
|SEB (Latvia)||Best Private Bank in the Baltic Countries|
|SEB (Lithuania)||Best Private Bank in the Baltic Countries|
|Danske Bank||Best Private Bank in Denmark|
|Nordea Bank (Finland)||Best Private Bank in Finland|
|Nordea Bank (Norway)||Best Private Bank in Norway|
|BBVA||Best Private Bank in Spain|
|Banco BPI||Best Private Bank in Portugal|
|Andbank||Best Private Bank in Andorra|
|Eurobank||Best Private Bank in Greece|
|LGT Bank||Best Private Bank in Liechtenstein|
|Pictet||Best Private Bank in Switzerland|
|Coutts||Best Private Bank in the United Kingdom|
|OTP Bank||Best Private Bank in Hungary|
|CSOB||Best Private Bank in the Czech Republic|
|Tatra Bank||Best Private Bank in Slovakia|
|Bank Handlowy||Best Private Bank in Poland|
|Erste (Croatia)||Best Private Bank in Croatia|
|Akbank||Best Private Bank in Turkey|
|Bank Julius Bär||Best Performing Private Bank|
Most of global banks provide private banking service, leveraging the parent brand to gain a client’s trust and confidence.
Global Private Banking
Retail Banking and Wealth Management
|Deutsche Bank||Deutsche Asset and Wealth Management|
|BNP Paribas||BNP Paribas Wealth Management|
|Credit Agricole||Credit Agricole Private Banking|
Barclays Wealth and Investment Management
|The Royal Bank of Scotland||Coutts Private Banking|
|Santander||Santander Private Banking|
|Société Générale||Société Générale Private Banking|
ING Private Banking (Netherlands)
ING Private Banking (Luxembourg)
Natixis Private Banking
Banque Privée 1818
|Lloyds Banking Group||Lloyds Bank Private Banking|
UBS Wealth Management
UBS Global Asset Management
|UniCredit||UniCredit Private Banking|
|Credit Suisse||Private Banking North America|
|Commerzbank||Commerzbank International Wealth Management|
Standard Chartered Private Bank
Islamic Private Banking
|Danske Bank||Danske Bank International Private Banking|
ABN AMRO MeesPierson
ABN AMRO Private Banking
|DnB Bank||DnB Private Banking|
|KBC Bank||KBC Private Banking|
|Erste Group Bank||Erste Private Banking|
There are several countries in Europe, where many banks provide private banking service: