the report of private bank.docx

the report of private bank.docx

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thereportofprivatebank

TheReportofPrivateBank

Tableofcontent

1.0Executivesummary3

2.0Introduction3

3.0Themainfeaturesoftheprivatebankingmarket4

3.1Thepersonalityofprivatebanking.4

3.2Theriskmanagementofprivatebank5

3.3Themaindifferencebetweentheprivateandcommercialbank6

4.0Thefinancialfeaturesofprivatebank6

4.1Rapiddevelopmentandfiercecompetition6

4.2Assetsize7

4.3RevenueStructure7

4.4Profitability7

5.0Theproductsandserviceonoffer8

6.0Thepastandfuturestrategy9

7.0Conclusion10

Reference12

1.0Executivesummary

Themainpurposeofthisreportistomakeabriefexplanationabouttheprivatebank.Thisreportcomprisesseveralpartsofthedetailsabouttheprivatebankwhichinvolvesthedevelopmenthistoryofprivatebank,mainfeaturesofthemarket,thefinancialfeaturesoftheprivatebankandtheproducts,strategiesoftheprivatebank.

Withthedevelopmentofeconomicsandinternationalcompanies,therewillbefiercecompetitioninthemarketofprivatebankincludingtheareaofclients,productsandexternalenvironment,soforthemanagersofthebanks,therewillbemanychallengesinpprivatebankingindustry.

Accordingtotheintroductionabouttheservicesandperformanceofprivatebank,therewillbesomestrategiesfortheprivatebanktomakeafurtherdevelopment.Andthepaststrategieswillgiveanexperienceforthedevelopmentoftheprivatebank.Thisreporthasdesignedsomefutureactionplanningwhichwillbebenefitforachievingthegoalsofthebanks.

2.0Introduction

Theprivatebankingrefertoakindofservicethatofferedbybankswhichisanimportantpartsofwealthmanagementanditsclientsaretypicallyaimedatthepeoplewhoowninvestableassetsover$1million.（Balmer&Stotvig,1997）

PrivateBanksoriginatedinthe16thcenturyinGeneva,Switzerlandandtheyformedinthe18thcenturyofindustrialrevolutioninBritainandtheyhaddevelopedinthe20thcenturyoftheUnitedStates.Thedevelopmentofprivatebankinghadexperienced300yearsinhistory.（Maude,2010）Currently,theglobalprivatebankinghasgreatlygrownupinGeneva,Zurich,London,NewYork,SingaporeandHongKong,ChinaandtherearethreemajorregionalmarketsincludingEurope,NorthAmericaandAsia.TherearealsosomefamousprivatebankcompaniessuchasUBS,CreditSuisseGroup,JuliusBaerBank,Citigroup,HSBCGroupwhicharethebestselectionintheglobalprivatebankingindustry.（Bicker,2013）Theprivatebankingbusinesshasformedbrandmanagement,diversifiedbusinessdevelopment.Buttherearemoreandmorecompetitionsandchallengesinthisindustry.Soitisnecessarytomakeareporttohaveadeeperunderstandingabouttheprivatebankandmakesomeusefulstrategiesforthefurtherdevelopment.

3.0Themainfeaturesoftheprivatebankingmarket

3.1Thepersonalityofprivatebanking.

（1）Specifictargetcustomers

Ingeneral,thereareonlypeoplewhoseAssetunderManagementishigherthan$500,000thancanbecomeaclientofprivatebanking.ButtheHighNetWorthclientswhoseentrustmanagementassetsarebetween$1and$50millionarethemaincustomersofthemarketandthiskindofHighNetWorthclientsaccountsfor62%oftheindustry'stotalassetsundermanagementcommission.Andthemaintargetofclientsislong-termpreservationofassets.（Weldon,1997）InSwitzerland,forexample,localfinancialinstitutionsentrustedtomanageassetsofabout4.331billionSwissfrancsinwhichprivateclientassetsaccountedfor33.9percentandinstitutionalclientsaccountedfor56.2%ofassetsandmostlyofinstitutionalclientsaresocialgroups,universities,researchinstitutionsandfamilyenterprises.（Lipseyetal,1988）

（2）Brandawareness

Thekeyprivatebankingbusinessdevelopmentistoletcustomershaveagoodexperienceandhaveadeepfeelingofthebrand,whichisanimportantfactorinthewealthmanagementbusinessoflong-termsustainabledevelopment.Therearevariousprivatebanksinmaturemarketsworldwideandthemarkethasbasicallypresentedperfectlycompetitivesituation.EventhelargestSwissbank（VSS）hasonly2%ofthetotalmarketshare.Therearemorestablecustomerbasisforvariousprivatebanking.Somehugeassetsentrustedevenhasgonethroughseveralgenerations,inacertainsense,thisbrandawarenessisthelargestprivatebank'scorecompetitiveness.（Gandetal,1999）

（3）Theindividualneeds

Thedegreeanddepthofservicesprovidedbyprivatebanksisfarthanordinarycommercialbanks.Thebusinessprocessesofprivatebankingcanbedividedintofourstages:

firstitisnecessarytounderstandcustomerneedsandfocusontheidentificationandriskpreferencesofcustomer.Thenitistimetodevelopaspecialwealthmanagementplanforclientsonthebasisoffullydisclosingtherisksoftheportfolioonreasonablearrangements.Andthentheprivatebankwillimplementtheplanandcommunicatewiththecustomerinaccordancewithmarketfluctuationstoadjustinvestmentplans.Finallytherewillbeanimplementationofcustomerbehavioronaninformationsystemplatformtotrackandimprovecustomerinformation.（Broadbent,1993）Duringthisbusinessprocessesitemphasizescustomer'sindividualrequirementsineachstep.

3.2Theriskmanagementofprivatebank

（1）Thecustomerbackgroundandwealthmanagementwishesidentification（KYC）

Themainriskmanagementintheprocessofprivatebankingoperationsfocusesonduediligencebeforeopeninganaccountandtheidentificationprocessinvolvestheidentificationofcustomercreditstatus,prestige,wealthmanagementwilling,riskperception,politicalorientation.Eachclientmustbeapprovedbytheheadoftheauditteamoffinancialadvisers.Theleaderisresponsibleforcustomerresourceallocation.（Lassaretal,2000）

Beforebankprovidesassetmanagementservicestonewclients,itisnecessarytorequirecustomerstoprovideproof,powerofattorneytoprovethesourceofassets,historicalrecordsandothercontrabandtrueidentity.Thiskindofstrictmanagementinthisareaaccordswithregulatoryauthoritiescomplianceriskmanagementrequirements.Italsoensuresthatthebankdoesnotdealwithillegalassetsandreducethereputationalriskofbanks.Inthecustomeridentificationprocess,itisparticulartoemphasisonprivatebankingbusinesstoavoidsensitivegroupsincludingPoliticallyExposedParties（PEP）,SensitiveCountryAffectedPartes（SCAP）suchasAfghanistanandSensitiveIndustryAffectedPalSies（SIAP）suchasarmsmanufacturingindustry.（Hens&Bachman,2011）

（2）Themanagementoffinancialadviser

Privatebankingfinancialadviseristhecorebusinessduringtheprocessofthedevelopment.Eachprivateaccounthasafull-timeprivatefinancialconsultant.Thesefinancialadvisershavehighacademicqualificationsandmostlyofthemservedasbranchmanagerofmultinationalbankswithmorethan10yearsofprofessionalexperienceinfinancial.Financialadvisersarebasedoncustomerrequirementstomakereal-timefinancialtransactionsandthenatureofworkitselfcontainsmanysubjectivedecisionsfactorinthewaytheprocessofcontactwithcustomers.（Levine,2002）Iffinancialadvisersmakeillegaloperationsduringthesinglecommunicationwithcustomers,itwillbringahighriskofthebank,thusitisnecessarytobuildastrictinternalmanagementsystemforprivatebanksfinancialadvisers.

（3）Complaintshandlingmechanism

Privatebankhasputmuchemphasisoncustomers’complaintsmechanism.Provisionoffinancialadvisersinthesigningofthefinancialagreementwiththecustomermustinformthecustomercomplaintsdepartmenttelephonebank.Somebankswillwriteacomplaintwayineverycontract.Forprivatebank,complainthandlingisagoodwayforthemtoenhancethequalityofservice.Banksmustfocusontheirdutiesinthecurseofprovidingservices.

3.3Themaindifferencebetweentheprivateandcommercialbank

PrivateBanksmainlyprovidecustomerswithavarietyofsuitableinvestmentadviceandastheimplementingagencyforthecustomertobuyandsellsecuritiesonbehalfofclients.Thecustomeristhebeneficiaryofholdingsecuritiesorinvestmentsecurities.Marketriskassociatedwiththisshallbebornebythecustomer.Mostcommercialbanksandproprietarytradingaredifferent.Bankscanprovidecustomerswithamorediverseportfolioandgetmoreproductcategorieswhichcandiversifyrisksforcustomersoverall.Therefore,privatebanksfacesmallermarketrisksthancommercialbanks.（Altunbasetal,2001）Intermsofcreditrisk,privatebanksgenerallydonotprovideloans,thecreditriskofcommercialbanksarefacingmuchgreaterthanprivatebanks.Commercialbanksneedtostrictlyconcentrateonthemanagecreditrisk,marketrisk,operationalbuttheprivatebankingismorefocusedonthemanagementofoperationalrisk.Atypicalprivatebankingoperationrisksincludefinancialadvisersrecommendtocustomersthattheproductisnotsuitablefortheirrisktoleranceordemand.

4.0Thefinancialfeaturesofprivatebank

Inthispart,thereportwilltaketheHSBCPrivateBankasanexampletomakeananalysisaboutthefinancialsituation.

4.1Rapiddevelopmentandfiercecompetition

TheHSBCPrivateBankinghasexperiencearapiddevelopmentintherecenttenyears.Butintherecentthreeyears,therearemoreandmorecompetitorscomingintothemarket,soitisfiercecompetitioninthemarketandtheGlobalPrivateBankingbusinessisindeclining.ProfitbeforetaxationofHSBCPrivateBankingbusinesswas$626millionin2014whichwas3.24timesof2013.Butthebusinesswaslessthan2010and2011.Thefigure1hadshownthem