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Private banking is a term for 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.
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 bank 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.
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 offense, not requiring banks to notify taxing authorities.[1]
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Private bank rankings
According to Euromoney's annual Private bank and wealth management rankings, which consider assets under management, profitability, ratio of clients to relationship managers and services offered, global private banking assets under management are up over 128% year on year.[citation needed]
Best private bank for ultra high net worth ($30m+) 2008. This table displays results of one category of the Private banking awards.[2]
| Rank 08 | Company | Rank 07 |
|---|---|---|
| 1. | Citigroup | 1 |
| 2. | Goldman Sachs | 2 |
| 3. | UBS | 3 |
| 4. | Credit Suisse | 5 |
| 5. | JPMorgan | 4 |
| 6. | Morgan Stanley | 8 |
| 7. | Merrill Lynch | 9 |
| 8. | HSBC | 6 |
| 9. | Pictet & Cie | 7 |
| 10. | Deutsche Bank | 11 |
Scale
According to Scorpio Partnership's Annual Private Banking Benchmark for 2006, the largest private banking division is at UBS AG, followed by Citigroup and Merrill Lynch. Each of these institutions gathered more than $1 trillion in assets under management for private clients.[3] Private banking institutions showed an increase in profits and assets under management in 2006 following a period of slow growth by 3.8% in 2004.[4]
Switzerland is a major location for private banking. Swiss banks hold an estimated 35% of the world's private and institutional offshore funds, or 4.6 trillion Swiss francs.
Traditional private banks such as Rothschild and Duncan Lawrie run on a different business model by not engaging in riskier practices many corporate private banks may consider prudent. In many cases traditional private banks are family-run businesses and specialize in long term banking practices that have evolved over the centuries.
The five largest private banks in the United States as of June 30, 2008, are as follows (listed by assets):[5]
- Merrill Lynch ($1.05 trillion)
- Citi Global Wealth Management ($843 billion)
- Bank of America Global Wealth ($653.2 billion)
- Wachovia ($551 billion)
- Morgan Stanley Global Wealth Management ($423 billion)
See also
References
- ^ Whitlock, Craig. "Swiss Talk Tough In Banking Battle: Blacklist Threat Looms Over Tax Havens" Washington Post, Sunday, March 29, 2009; Page A07.
- ^ Euromoney magazine. January 2008. Annual rankings. http://www.euromoney.com/Article/1786822/Article.html
- ^ Scorpio Partnership Benchmark 2006, Press Release and summary
- ^ City Business Series, 2008, International Financial Services London
- ^ "2008 Top Wealth Managers in the U.S.". Barron's: p. 32. October 13, 2008. Listed by accounts of $1 million or more.
- 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]
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