MT Survey of Surveys: Private Banking
As the numbers of the extremely wealthy have swelled worldwide, so has the business of the private banks. Transparency is hard to achieve here, but banking secrecy is not what it was. David Bain reports.
A part of the financial services sector that keeps itself well hidden from the public glare is where the rich stash their cash - private banks.
We've all heard of investment bank monoliths like Goldman Sachs and JP Morgan, but less familiar are private banking dynasties such as Pictet, MeesPierson and C Hoare & Co, all specialists in pandering to the fiscal needs of the world's wealthy.
Private banks have flourished over the past 10 years as the ranks of the rich have swelled. Today, an estimated 7.3 million individuals worldwide control a remarkable dollars 27.2 trillion in liquid assets, according to the annual Wealth Report produced by Merrill Lynch and Cap Gemini Ernst & Young.
The 'private' in private banking comes from the renowned secrecy of the Swiss banks, which grew up after the Napoleonic wars to protect the assets of the rich from the prying eyes of often hostile governments. Yet this secrecy has not fared well in the post-9/11 world, where tracking down sources of terrorist financing and enforcing anti-money laundering measures preoccupy officials in Washington and Brussels. Tax-hungry governments are also making it harder for the rich to squirrel their money away out of the taxman's reach.
The lack of transparency has always been a problem in obtaining information.
Most private banks are, by their nature, reluctant to release details about themselves to a wider public. Swiss private banks tend to be partnerships and don't have awkward shareholders to deal with. British private banks such as Coutts and Schroders Private Bank are components of much larger organisations and their numbers are easily subsumed into the reports of the Royal Bank of Scotland and Schroders Investment Management, respectively.
The well-established annual PAM Directory attempts to bring transparency to UK private banking, with league tables based on assets under management - the most widely used benchmark of the health of private banks - and client numbers. And others are keen to get in on the act of measuring the success of this most discreet sub-sector of the financial services industry. Wealth management consultancy Scorpio Partnership has been benchmarking private banks since 2002, using a methodology similar to that of PAM. And that favourite publication of the investment banking world, Euromoney, recently got in on the act with an annual survey on the best-in-class private banks, conducted on a peer review basis.
The Swiss are still global major players, but some names are becoming more familiar as consolidation makes its mark. Citigroup, HSBC and Merrill Lynch all have huge private banking businesses and have deep pockets to fund an increase in their market share. The two acknowledged titans of private banking - UBS and Merrill Lynch - manage about dollars 965 billion and dollars 837 billion respectively, according to the Scorpio survey. UBS's acquisition of Paine-Webber in 2000 gave the Swiss money manager a foothold in the vital US market. The nearest rival to UBS and Merrill is Zurich-based Credit Suisse Private Bank with dollars 399 billion of assets under management.
UBS also takes the gold medal in Euromoney's peer poll of the best global private banks, followed this time by Citigroup Private Bank and, in third place, London-based HSBC Private Bank. Clive Bannister, chief of HSBC Private Bank and son of four-minute miler Roger, is running that extra mile himself to see his bank in the top three globally. Currently, the bank lies in fifth spot in the Scorpio survey. In the UK, HSBC makes it into only eighth spot in PAM's main survey.
Closer to home, Coutts gets top billing in the UK in the Euromoney survey and second place in PAM's survey, with pounds 19. …