Where Are Private Banks Located?
The geographical location of a private bank is very important, since the private bank has to comply with local laws and regulations. There is a strong correlation between the number of private banks based in a country, and the economic and political stability there. Private banks tend to base themselves in economically stable jurisdictions with low debt and strong government.
In order to protect assets, individuals entrust their wealth to banks based in economically and politically stable countries to make it more difficult for their home government to confiscate, freeze or devalue their savings.
Historically, Switzerland was favoured as a prime location for offshore banking (more information), and still remains the largest centre for offshore private wealth today with over $2 trillion in AUM. Switzerland has long been a stable country with a strong economy. The Swiss remained neutral in two World Wars and until recently, had a strong policy of bank secrecy which appealed to clients looking to conceal assets from their own authorities.
The United Kingdom sits at number two, with around $1.6 trillion in offshore assets. The UK is closely followed by Singapore, which analysts expect to overtake the UK by 2020 (read more).
Favoured jurisdictions for private banking
Rated AAA by Standard & Poor’s
Long tradition in private banking
Stable currency – the Swiss franc (CHF)
Strongly diversified national economy and stable political framework
- The Bahamas
Long tradition of private banking for over 80 years
Home to over 250 licensed banks and fiduciary services providers
Attractive tax regime
- Hong Kong
Boasts high rate of private wealth creation and growth
Attractive for Non-Residents
Generally low taxation
Very business friendly and good choice for new corporate and investment vehicles
Other prime locations for private banks:
- The Netherlands
- The Netherlands
- United States
Private banks also go where the market is. It’s no coincidence that many players have flocked to Asia-Pacific (the fastest growing region for private wealth) in recent years, setting up new offices in Hong Kong, Singapore, Japan, Thailand and Indonesia.
The Middle East has also seen a rise in the number of private banks. European private banks from Switzerland, Liechtenstein and Luxembourg have opened branches in Dubai, Abu Dhabi and Bahrain to compete with the local players. Asian private banks have also set up shop, with Bank of Singapore and DBS both quickly establishing themselves in the Gulf region.
The Movement of Private Banking Branches
The number of branches a private bank has is not a certain indicator of the size of the private bank. Some private banks concentrate their services in a handful of countries while others spread out more thinly over multiple continents.
Ultimately, private banks register and open branches where the money is based. Certain governments are becoming more involved in where their wealthiest citizens keep their money, through capital transaction controls, increased regulations, and investigating tax schemes in order to curb tax avoidance. This means that the historic choices for offshore wealth, such as Switzerland, may increasingly fall behind other countries.