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Private banking catching on in China

By Wang Ying (chinadaily.com.cn)
Updated: 2009-01-16 19:37

Bank of China (BOC), the nation's third largest commercial bank by market value, opened its first private banking service in Fuzhou, Fujian province Thursday.

Only those who own at least 8 million yuan ($1.17 million) are qualified to become a private banking client. BOC has, however, lowered the threshold to 5 million yuan during the trial operation period. The first batch of clients will be chosen from former VIP members of the bank.

According to a senior bank official, this is the ninth private banking division that BOC has opened across China, with another division coming up in Xiamen later this year. In business metropolis like Beijing, Shanghai, Guangzhou and Shenzhen, private banking is no longer the buzz word with some banks setting the entry threshold at 10 million yuan for wealth planning.

The BOC official said each private banking client would have a designated personal banking manager, an investment consultant and a financial assistant. These experts will help clients in planning children's education, property investment, taxation, life planning for after retirement, investment advice on art collection, health consultancy etc.

Sources said currently around 5 percent of Bank of China's VIP clients have a wealth of more than 3 million yuan.

Liu Jun, analyst with Changjiang Securities told China Daily: "Major domestic banks are vying for a slice of the private banking market in China. This will not only bring enormous profit, but also boost the brand image of a commercial bank, which is of great note during an economic downturn."

Originated in Europe, private banking requires excellent financial management abilities and abundant experience. Private banking in China is still at a nascent stage. As a result, most of the private banks cannot provide clients with global investment and offshore financial management, but only act as an upgraded version of a traditional financial management center.

According to Liu, although China's private banking still lacks proficiency and expertise, "it is a process of improvement and perfection." Liu believes the full development of banking services would depend largely on China's overall economic maturation.