Private Banking: Maximising Performance in a Competitive Market

The print copy of this title is no longer available. Ebook available (click button above).

David Maude, economist at the Bank of England, and Philip Molyneux (PhD), senior lecturer and co-director of the Institute of European Finance, provide incisive analyses of trends in this dynamic and expanding global business. The book's 15 chapters offer essential insight into the repositioning of the major banks and the attempts of new players to compete for business.

Chapters examine: 

• private banking centres
• the private banking client
• client needs
• maximising portfolio performance
• foreign exchange services
• offshore banking
• emerging markets
• understanding regulation
• controlling risk
• developing international clients
• maximising fees, account sizes
• competitive comparisons of different jurisdictions

Table of Contents

CONTENTS

iii Authors’ biographies

iv Dedications

v Contents

xiii Foreword

xvii Acknowledgements



1 Chapter 1 Private banking origins and historical evolution

Introduction

History and private banking

The Swiss connection

The attractions of Switzerland

Swiss private banking history

Swiss banking cities – an historical perspective

– Geneva

– Zurich

– Basle

Evolution of other traditional private banking centres

The evolution of UK private banking

– Traditional private banks

– Merchant banks and stockbrokers

Overview of private banking in the post-war period

Conclusion

17 Chapter 2 Modern private banking: an overview

Introduction

What is modern private banking?

Size and growth of the private banking market

– Demographic trends

– Liberalisation

Main services and basis of competition

Institutional structure

– Private partnerships

– Domestic retail banks

– Universal banks

– Investment banks

– Non-banks

Conclusion



35 Chapter 3 Towards a definition of the private banking client

Introduction

Client characteristics

Client characteristics in specific regions

– Western Europe

– United States

– Eastern Europe

– Latin America

– Asia Pacific

– The Middle East and Arab States

Banking demands

– Investment demands

– Risk management

– Corporate finance

– Lending products

– Branch network

– Trusts and financial planning

– Relationships

– Client service

Financial entry requirements

Resegmentation in private banking

– Resegmentation strategies

Conclusion



53 Chapter 4 Existing client needs

Introduction

Client needs

Traditional private banking offer

Service quality and the client relationship

Changing client requirements and the competitive environment

Investment management

Business and investment loans

Trusts, custody and tax planning

Conclusion



83 Chapter 5 Asset management services

Introduction

Identifying client needs

Discretionary asset management

– Structuring the investment process

– Asset allocation

– Market timing

– Portfolio performance analysis and reporting

Non-discretionary asset management

Investment fund types

– Actively managed funds

– Defined asset funds

– Index funds

– Guaranteed return funds

– Umbrella funds

– Hedge funds

– Special-purpose investments

Advisory and transaction-based services

– Investment advice

– Research

– Trade execution

– Margin trading

Conclusion



101 Chapter 6 Risk management services

Introduction

Financial risk

Managing financial risk

Risk management products

Forward rate agreements

Futures

Swaps

Options

– Caps, floors and collars

Exotic options

– Basket options

– Quanto options

Structured products

Value creation and risk management

– Advisory services

– Transaction capability

– Risk monitoring and hedge performance review

Conclusion



115 Chapter 7 Foreign exchange services

Introduction

Foreign exchange demands of the private banking client

Global foreign exchange dealing

Methods of quotation

Foreign and domestic returns

Currency analysis

Technical analysis

Foreign exchange exposure management

Limit orders

Hedging

Portfolio considerations

FX hedging – some examples

– Hedging exchange risk on equity investment

– Hedging exchange risk on investment in fixed interest securities

Currency overlay

Conclusion

137 Chapter 8 Related services

Introduction

Trust services and private investment companies (PIC’s)

Insurance services

Art advisory services

Investing in gold

Silver, platinum and palladium

Other advisory services

Conclusions



157 Chapter 9 Pricing, service quality and the role of technology

Introduction

Pricing private banking services

Private banking pricing strategies

– Two-part tariffs

– Single transaction charges

– Ski-lift pricing

Pricing private bank services – what they actually do

– Strategic implications of transparent pricing

Service quality and technology

Capital accounts and global balance reporting

Global custody systems

– Euroclear and Cedel

Global funds transfer systems

– Global interbank communications systems: The Role of SWIFT

– Cross-border retail payments systems

– Cross-border interbank netting and settlement systems

Private banking IT systems and universal banks versus boutique operators

Conclusion



187 Chapter 10 Performance and risk management

Introduction

Costs in private banking

Profitability and performance benchmarking

Internal risks and controls

Trading risk and the Basle Accord

– Additive capital requirements

– Decentralised risk assessment

– Back-testing

Growth and acquisition of new clients

Industry restructuring

Conclusion



205 Chapter 11 Private banking: regulatory issues

Introduction

Regulation

Historical perspective

Secrecy and confidentiality

Money laundering

International regulatory initiatives

The role of the private bank

Specific country examples

Other issues

– Taxation

– Fund management

– Accounting disclosure

Conclusion



225 Chapter 12 Offshore private banking

Introduction

Onshore versus offshore

Switzerland

Luxembourg

Channel Islands

Hong Kong and Singapore

Other offshore centres

– Caribbean / Central America Basin

– European coastal enclaves and independent states

– Persian Gulf states

– Asia Pacific Basin and the sub-region of Oceania

– Indian Ocean centres

Onshore-offshore centres

Conclusion



247 Chapter 13 Private banking in emerging markets and economies in transition

Introduction

Growth of emerging markets

Private wealth in emerging markets

Client demands in emerging markets

Private banking in transition economies

Obstacles to private banking

Conclusion



261 Chapter 14 Private banking associations, professional bodies and research organisations

Association Des Banquiers Privés Suisses (Swiss Private Bankers Association)

Groupement Des Banquiers Privés Genevois (Geneva Private Bankers Association)

Fondation Genève Place Financière

Offshore Institute

International Tax Planning Association

International Private Banking Council

Society of Trust and Estate Practitioners

Association of Solicitor Investment Managers

Institute of European Finance

International Private Banking Advisory Group



282 Chapter 15 Future for private banking

Authors

David Maude is an economist in the Monetary Instruments and Markets division of the Bank of England. He currently works on a range of issues relating to the UK government bond and money markets; previously, he worked on banking policy in the Bank's Economics Division. His publications include papers on deposit insurance and value risk analysis; he also contributed to the second edition of Investment Banking: Theory and Practice, published by Euromoney. Before joining the bank, he worked for Price Waterhouse and Credit Suisse Financial Products in London. He hold s a degree from the universities of Exeter and Cambridge.

Philip Molyneux (PHD) is a senior lecturer in Banking and Finance and co-director of the Institute of European Finance; he was formerly National Westminster Bank lecturer in Banking, and Research Officer in the Institute of European Finance. He is joint author of Structure and Regulation of UK Financial Markets, and Changes in Western European Banking; and the sole author of Investment Banking: Theory and Practice, and co published Efficiency in European Banking With EPM Gardener and Y. Altunbas, which is due to be published by John Wiley.

Dr Molyneux has also published a substantial number of articles in both academic and professional journals. His main areas of research focus on the structure and performance of European Banks and insurance companies, competitive conditions in financial centres, and regulation of European financial markets. He has undertaken consultancy work for several leading banks.

Related Titles

• The New Family Office: Strategies for Consulting to the Affluent »
• Understanding Volatility and Liquidity in the Financial Market »
• South African Financial Markets Review 2008/2009 »
• Credit Risk for Private Banking: Assessing the Credit of High Net Worth Individuals »
• Taming Risk: Complete Credit Portfolio Management »
• Exposed to the J-Curve: Understanding and Managing Private Equity Fund Investments »

Digital Products  £$€