What is Global Private Banking?

Danielle DeLee

Global private banking is a term that describes a collection of services that international banks provide to wealthy clients. To take advantage of private banking, an individual must have both high net worth and a high level of disposable income. Global private banking is essentially an asset management system, but it does offer additional services to clients. For example, private banking clients can receive higher interest rates on deposits than do ordinary customers.

In general, wealthier clients tend to invest in international banks due to their offshore investments.
In general, wealthier clients tend to invest in international banks due to their offshore investments.

Private banking originated in Europe in the 17th century or earlier. Wealthy men had other commitments, and did not wish to be burdened with the question of how to manage their funds. They entrusted their wealth to a private banker, with whom they built a close relationship. Private banking has endured as a way for wealthy people to transfer the responsibility for their accounts to a responsible manager. Though it has become less personalized, the concept is the same.

The “global” part of global private banking comes from the increased returns that clients can see from offshore investments. This means that wealthier clients tend to invest in international banks. Increased international returns, along with higher interest rates on deposits, often entice wealthy clients to pay the fees the bank charges for managing a private banking account.

In addition to managing clients’ assets and giving them preferential rates, global private banking providers offer their clients some personalized services. For example, private bankers give some financial advice on investments that they do not handle directly, like real estate. They also give clients advice on filing taxes. They may also perform limited concierge service, or courtesy services, to the client. These include actions like locating investments that are beyond the scope of the private banking account.

The restrictions on which clients qualify for global private banking vary from bank to bank. Traditionally, the minimum deposit limit for private banking clients was around $100,000 US Dollars (USD). Some banks require only $10,000 in deposits; these banks have made private banking more accessible in response to the increased distribution of substantial wealth. These banks also hope that the client will accumulate more wealth and maintain his account with the same institution.

The exclusivity of private banking has been partially eroded by the emergence of wealth management. The two services are similar, but wealth management is more comprehensive. It gives its clients access to a wider range of products and services, like more access to professional financial advice and more extensive concierge services than traditional global private banking offers. Wealth management providers find real estate opportunities for their clients, broker yachts for them, help them get loans for private jets and even book their hotel and restaurant reservations. Private banking, however, is usually restricted to wealthier clients than is wealth management.

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