Friday, September 24, 2010

Private banking shifts to Asia

It's official - the private bankers, smarting from defeats at the hands of governments in Europe and the United States, are turning their attention to the developing world, and most especially Asia. There has been such a flurry of reports about this in the past week that it's been hard to keep up. Just for example, we have this:
"Morgan Stanley plans to double its Asia head count in wealth management over the next three years."
Or this article entitled Julius Baer eyes ‘second home’ in Asia which notes a sure-fire indicator of what is happening:
"Many private bankers say the costs of expansion are rising fast in Asia because of a “war for talent”
which was complemented by this:

"Julius Baer chairman Raymond J. Baer told a roundtable discussion meeting with financial editors on Monday that his bank would upgrade its Hong Kong office to a booking center, open an office in Shanghai and a trust company in Singapore, in addition to the branch office it set up in the city state in 2006.


And followed by this:
"Credit Suisse's private banking chief told Reuters Insider TV net new assets from rich clients in Asia will grow well above 20 percent, higher than the 15 to 20 percent annual growth the bank is targeting for end 2012.
And now we have [PwC] forecasting that:

“by 2040, “the three largest clusters by value of assets under management are projected to be New York, Singapore and London

Singapore is rapidly turning itself into a very dirty and increasingly important jurisdiction, and needs to be increasingly targeted by the regulators and policy-makers and criminal authorities of responsible jurisdictions. Contacts tell us that Singapore is aggressively playing the offshore deception of signing enough Tax Information Exchange Agreements (TIEAs) to ward off the OECD's blacklist threats, while ensuring there are enough "safeguards" (read: loopholes for criminals and others) to ensure that real information exchange will never happen.

For more on Singapore, see our 2008 blog entitled Singapore: dirty money, no questions asked. Which contains some useful historical pointers, and a good overview description:

"Former chief economist at Morgan Stanley, Andy Xie, wrote in a private email that was inadvertently leaked to the public, said that Singapore's financial success "came mostly from being the money laundering center for corrupt Indonesian businessmen and government officials.''

PWC seems to think that this is OK (or do they think this is just a minor detail?). It thinks that Singapore, along with Hong Kong,

"offer less burdensome tax regimes than their western counterparts and have ‘well-regulated but moderate’ regulatory structures."

All in all, two things are happening here. First, Asia's wealth is growing, and private bankers in Europe and the U.S. are licking their lips at the thought of it all. Second, governments in Europe and North America are starting to get really quite angry at the criminal activities of private bankers on their own soil, and are (half-heartedly, it has to be admitted) trying to crack down on it a bit. So the private bankers thought they would focus their criminal activity increasingly on developing countries. Problem solved!

Here is what we would like to see. Today, these institutions are quite happy to call themselves private bankers - when the word "private" is a clear marker for the criminality that underlies the entire business model. We hope that in a few years' time, the word "private" when associated with "banker" will have become such a dirty word that they will no longer want to be known by that term. Please help us achieve that cultural change.

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