Private banking in Asia – a survey

Main Article:

Grey matters

Gunter Dufey, Private banking in Asia – a survey, available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1463261

Abstract
This survey focuses on some unique aspects of private banking and wealth management in Asia. There are a number of unique features that distinguish private banking in Asia from that business in the rest of the world. First, Asian banking tends to be more ‘trans-border’ by nature, that is, the origin of the assets and the administration reside in different jurisdictions. Second, a disproportionately large share of clients are active entrepreneurs of the first or second generation, who are often members of minority groups in their economies. Furthermore, and third, among the service providers, there is keen competition among European-based banks, North American banks and brokerages as well as domestic institutions in Hong Kong and Singapore; yet there is little evidence of consolidation and the market remains highly fragmented. Fourth are the notable differences in asset compositions of investment portfolios as well as the predominance of females among the important relationship manager population in Asia.

As to any lasting effects of the financial crisis of 2008/09 on the private banking business in Asia, hard facts have yet to emerge. The fiscal problems of major and minor countries in the world have prompted a renewed push for lessening bank secrecy, not only in cases of criminal activity but also ‘ordinary’ tax avoidance. Offshore jurisdictions around the world are under pressure to provide information to foreign fiscal authorities. As to products and services, it is likely that there will be less emphasis on complex structured products, more focus on credit-worthiness of the institutions offering private banking services, and, in general, less competition in terms of innovative products due to the demise of the American investment banks in global markets. However, economic growth rates in the region, in combination with high savings rates, will make Asia an area of alluring opportunity for financial institutions offering competitive private banking and wealth management services.

CFR comment
Gunter Duffey, an emeritus faculty member of the Ross School at Michigan and a Fellow at Nanyan Technological University in Singapore, provides a concise overview of private banking for very high net worth individuals in Asia, focusing on what differentiates it from private banking in the United States and Europe. He concludes that the key distinctions in Asian private banking is a greater emphasis on trans-border activity, where assets originate and are administered in different jurisdictions; a larger share of clients are first- or second-generation entrepreneurs, who are often members of minority groups; a highly fragmented market; and a higher proportion of women among the relationship managers.