Private Banking

Private banking is a term for banking, investment and other financial services provided by banks to private individuals investing sizable assets. The term "private" refers to the customer service being rendered on a more personal basis than in mass-market retail banking, usually via dedicated bank advisers. It should not be confused with a private bank, which is simply a non-incorporated banking institution.

Historically private banking has been viewed as very exclusive, only catering for high net worth individuals with liquidity over $2 million, although it is now possible to open some private bank accounts with as little as $250,000 for private investors. An institution's private banking division will provide various services such as wealth management, savings, inheritance and tax planning for their clients. A high-level form of private banking (for the especially affluent) is often referred to as wealth management.

According to Scorpio Partnership's Annual Private Banking Benchmark for 2006, the largest private banking division is at UBS AG, followed by Citigroup and Merrill Lynch. Each of these institutions gathered more than $1 trillion in assets under management for private clients. Private banking institutions showed an increase in profits and assets under management in 2006 following a period of slow growth by 3.8% in 2004.

Switzerland and Luxembourg are major locations for private banking. Swiss banks hold an estimated 35% of the world's private and institutional offshore funds, or 4.6 trillion Swiss francs.

Traditional private banks such as Rothschild and Duncan Lawrie run on a different business model by not engaging in riskier practices many corporate private banks may consider prudent. In many cases traditional private banks are family-run businesses and specialize in long term banking practices that have evolved over the centuries.

The five largest private banks in the United States as of June 30, 2008, are as follows (listed by assets):

1. Merrill Lynch ($1.05 trillion)
2. Citi Global Wealth Management ($843 billion)
3. Bank of America Global Wealth ($653.2 billion)
4. Wachovia ($551 billion)
5. Morgan Stanley Global Wealth Management ($423.0 billion)