Private Banking

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.

There are several parameters to be considered when choosing a bank for private banking, awards received by the bank can also be taken into account.

Private Banking Clients

In general, private banking in provided to high-net-worth individuals, but several banks also offer private banking to institutions.

For example:

  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.

For example:

   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.

Private Banking Products

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

Private banking services can be subdivided into 2 broad categories: asset management and financial advising. Examples of services from each category are shown below:

Asset Management

Financial Advising

  • asset allocation
  • risk management
  • fiduciary solutions
  • protecting and growing assets in the present
  • investment counseling
  • market analysis
  • tax counseling
  • estate planning
  • retirement planning
  • inheritance planning

Private Banking Process

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.

Private Banking Process

Phase 1: Definition of investment profile and objectives

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.

Phase 2: Definition of the investment strategy

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.

Phase 3: Execution and implementation

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.

Phase 4: Follow-up and performance review

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.

Private Banking Models

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.

Discretionary Portfolio Management

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.

Private Banking Models

Portfolio Advisory

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.

Banking and Investment Services

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.

Private Banking vs Premium Banking

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.

Retail Banking

Private Banking

  • priority handling of the client's banking transactions with minimum waiting time
  • possibility for numeric accounts and other options for increased confidentiality
  • preferential conditions on the bank's products and services, such as the possibility to withdraw higher amounts in cash without pre-advice
  • preferential tariff on selected products and services, such as higher than the standard interest rates
  • a personal manager, who can be contacted at any time
  • investment counseling
  • periodical analysis of the client's investments
  • regular market information and analyses

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.

For example:

  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.

Private Banking vs Wealth Management

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

Private Banking vs Asset 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.

Private Banking vs Offshore Banking

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.

Choosing Private Banking Bank

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.

Awards in Private Banking

Several awards exist for private banking. European banks, awarded by PWM/The Banker in 2014 are shown below.

UBSBest Global Private Bank, Best Private Bank for Philanthropy Services, Best Global Brand in Private Banking
BNP Paribas Wealth ManagementBest Private Bank in Europe
Erste BankBest Private Bank in Central and Eastern Europe, Best Private Bank in Austria
KBC BankBest Private Bank in Belgium
Berenberg BankBest Private Bank in Germany
UniCreditBest Private Bank in Italy
BNP ParibasBest 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 BankBest Private Bank in Denmark
Nordea Bank (Finland)Best Private Bank in Finland
Nordea Bank (Norway)Best Private Bank in Norway
BBVABest Private Bank in Spain
Banco BPIBest Private Bank in Portugal
AndbankBest Private Bank in Andorra
EurobankBest Private Bank in Greece
LGT BankBest Private Bank in Liechtenstein
PictetBest Private Bank in Switzerland
CouttsBest Private Bank in the United Kingdom
OTP BankBest Private Bank in Hungary
CSOBBest Private Bank in the Czech Republic
Tatra BankBest Private Bank in Slovakia
Bank HandlowyBest Private Bank in Poland
Erste (Croatia)Best Private Bank in Croatia
AkbankBest Private Bank in Turkey
Bank Julius BärBest Performing Private Bank

Private Banking Providers

Major European Banks Offering Private Banking

Most of global banks provide private banking service, leveraging the parent brand to gain a client’s trust and confidence.

NamePrivate Banking
HSBC 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 Premier 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 Bank ING Private Banking (Netherlands)
ING Private Banking (Luxembourg)
BPCE Natixis Private Banking
Banque Privée 1818
Lloyds Banking Group Lloyds Bank Private Banking
UBS UBS Wealth Management
UBS Global Asset Management
UniCredit UniCredit Private Banking
Credit Suisse Private Banking North America
Commerzbank Commerzbank International Wealth Management
Standard Chartered Standard Chartered Private Bank
Islamic Private Banking
Danske Bank Danske Bank International Private Banking
ABN AMRO Private Banking
DnB Bank DnB Private Banking
KBC Bank KBC Private Banking
Erste Group Bank Erste Private Banking

Private Banking Destinations

There are several countries in Europe, where many banks provide private banking service: