Private Banking is an exclusive banking service for wealthy clients. The bank will match you with one or more private bankers who will help you with your money. You will receive more personal attention than most customers, and the bank may offer other perks such as discounts on lending rates or invitations to special events.
Private bankers look at your bank accounts, mortgages, and other loans. Some private banks also help you manage your investments, but not all.
Private banking is not the same as wealth management, but the terms are often used interchangeably. Not all private bankers are focused on investments, while wealth management firms put a lot of emphasis on building your investment portfolio. Wealth management also focuses on financial planning and advice.
When it comes to private banking, think about all the services you would normally get from a bank, but enhanced.
You probably won’t find a bank that caters only to private clients. Many well-known banks simply have a separate company private banking department with their own website.
Who is eligible for private banking?
Private banking is aimed at high net worth customers, but the amount you should consider as a high net worth customer varies from bank to bank.
For example, you will need a minimum of $1 million in checking, savings, retirement, and investment accounts to become a Citibank retail customer. However, PNC Bank only requires $50,000.
Pros of private banking
Special attention
When you sign up for private banking, you are assigned to a banker. You will speak to this person every time you need a favor.
Not only does this mean you won’t have to wait on the phone to speak with the first available representative, but it also means that the banker will be aware of your specific financial situation.
Benefits and discounts
Each private bank offers its own perks for customers, such as big sign-up bonuses, preferential rates on loans, or reimbursement of fees for ATM withdrawals or international transactions. Many private banks also hold exclusive events for private clients only.
Business account bonuses
If you are a business owner, you can open a personal and business account with the same private bank. Business accounts come with a private banker who is trained to work with businesses.
Cons of private banking
Low-interest rates
Private banks require you to keep a lot of money in combination with accounts and investments. This means that you will likely have tens of thousands, if not hundreds of thousands, in a savings account.
Many private banks have lower interest rates on savings. You could earn a lot more by keeping your money in a high-yield savings account at a bank that doesn’t offer private banking.
The difference between 0.05% and 0.50%, for example, might not seem like such a big deal to someone with a couple of thousand dollars in the bank. But if you keep a large amount in savings, you can leave thousands of dollars on the table by keeping the cash in a low-interest account.
Before opening a private bank account, consider whether the discounts you get on certain products will outweigh the amount you forgo by agreeing to a low-interest rate.
Management fee
Private banking usually has higher management fees than conventional banking. This can come in the form of monthly bank account maintenance fees (although some banks allow you to waive these fees). Or a private bank may charge a percentage of your investment, which can add up to a substantial amount since you keep most of the money in the institution. Before signing up for private banking, make sure you understand the fee structure.
Banking system in Hong Kong
Hong Kong has traditionally been one of the most preferred places for doing international business, including with the involvement of foreign companies. This is the center of East Asia, the world’s best financial market in 2011, with a reliable banking system and a fairly low tax rate. At the same time, the banking sector in Hong Kong is not only developed, but it is also flourishing, as evidenced by the fact that more than 70 of the world’s largest banks have opened their main offices here and carry out operations.
The Chinese banking system has a three-tier structure and is completely under state control. The first level is formed by the People’s Bank of China and political development banks. The People’s Bank, being the issuing, credit, payment, and settlement center of the country, is responsible for the development and implementation of monetary policy, and the control and supervision of the banking system is carried out by the All-China Banking Regulatory Commission.
Three political development banks – the State Development Bank of China, the Agricultural Development Bank of China, the Export-Import Bank of China – are responsible for the implementation of government programs in the industrial, agricultural and foreign trade sectors, respectively.
China’s banking system is based on state-owned second-tier commercial banks, among which the “big four” is in the lead, namely: the Bank of China, the Industrial and Commercial Bank of China, the Construction Bank of China, the Agricultural Bank of China. State commercial banks are urban and rural. Large commercial banks are singled out as a special category, and the modernization and improvement of the efficiency of state-owned banks is the prerogative of the government.
The presence of banks controlled by non-residents in the Chinese banking system is not as extensive as in other countries, since the ban on their activities in China was lifted only after the country joined the WTO. Also at the second level are various financial companies that carry out banking operations: asset management corporations, trust investment companies, leasing financial companies.
To counteract the traditional institution of usury in China, there is a developed system of urban and rural cooperation, which is the basis for financing small and medium-sized businesses in China and occupies the third level of the banking system. It exists in the form of agricultural and urban credit cooperatives, as well as numerous post offices.
They are divided into two types: large Chinese banks with the participation of state capital – the famous “big four”: the Bank of China; Agricultural Bank of China; Industrial and Commercial Bank of China; Construction Bank of China and joint-stock banks. The country’s leadership is especially interested in the development of the largest banks and makes great efforts for this. In general, most of them are managed by residents, the share of non-residents is small, as it was under a ban for a long time, which was lifted after the country joined the WTO in 2001.
State commercial banks are divided into urban and rural depending on the field of activity. Moreover, this level of the banking system includes leasing financial, trust investment, and other financial companies that carry out a wide range of banking operations. At the third level of China’s banking system are agricultural and urban credit cooperatives and post offices. They are the main base for the development of small and medium-sized businesses in the state.
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Adam is an internationally recognised author on financial matters with over 830million answer views on Quora, a widely sold book on Amazon, and a contributor on Forbes.
