A Look at Private Banking

Private banking, or private banking services, is one of the indicators of the condition of a country’s economy. Tatiana Voloshkina explains what is happening to Russian industry and how wealthy clients are reacting to the hanging rouble exchange rate.

The individual banking service system appeared over three centuries ago. For a long time, Swiss banks were considered exemplary. For Russia, this direction is comparatively new – its occurrence can be traced back only as far as the mid 1990s. As a whole, the Russia’s private banking industry is developing successfully.

The last few years have been a turning point in terms of the relationship between leading Russian banks and this promising sector. It was then that they began to create special structures, capable of tapping into the wealthy client service market. Promsvyazbank, for example, specified private banking as a special business direction over six years ago, and it now already has three VIP offices in Moscow and 30 points of presence in different regions. In March, market research firm Frank Research Group recognized Promsvyazbank as one of the industry’s leaders, including it in the list of the top five banks operating in Russia in the segment for wealthy clients.

Overwhelmingly, private banking clients are highly educated, wealthy, and successful busi-nessmen. These are professionals, successful in developing their business, as well as intellectual, respectable persons. As a rule, their choice of banks is based on the recommendations of friends and acquaintances.

Private banking forms an integrated offer in capital management for its clients. On the one hand, they offer classic banking services for VIP clients: account operations, deposit placement, provision of credits, and premium bank card services. On the other hand, they can choose non-bank services and products, such as brokerage services, investment consulting, financing REPO securities against collaterals, operations with precious metals, accumulating life insurance, capital management, and alternative investments (i.e. education abroad for children, investments into art collections, wine collections, jewels, and structured products). An important difference specific to private banking is the absolute confidentiality of all client financial operations.

By December, the balance sheets in the private banking segment amounted to 44% in roubles, 34% in US dollars, and 20% in euros. Due to the sharp rise in the exchange rate at the end of December, some clients transferred portions of their funds to additional deposits, and by May 2015, the situation had slightly changed: the balance in US dollars increased by seven percent, due to the decrease in rouble and euro deposits, growing to 41%.

Premium deposits from credit and debit transactions are most in demand, as well as multi-currency – with the option of transition from one currency to another at a special rate. This allows customers to quickly react to changes in the currency market.

Despite the economic shocks, leading players are only increasing the number of clients. This is partly explained by the flow of clients coming from small banks, in which trust is fading, due to the wave of licence recalls.

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