Matthew Lynn says banks that prospered by offering exclusive ‘wealth management’ services during the boom years are about to encounter some very angry customers
Of all the phrases in the financial lexicon, ‘private banker’ is one of the most evocative. It summons up images of discreet addresses in the more remote Swiss cantons, of luxuriously furnished townhouses in Mayfair, of chequebooks printed in florid script, of pinstriped executives who never stint on the second bottle of claret. Thriller writers find them as handy a plot device as a fully loaded Beretta. Nothing else manages to wrap up tradition, snobbery and timeless financial solidity quite so completely in one institution.
Until now, that is. Over the next few months, the private banking industry looks set to be rocked by a series of scandals. In this country, Sir Keith Mills, the multi-millionaire founder of the Nectar card business, has just launched a high-profile campaign against what was once the grandest of all Britain’s private banks, Coutts & Co. More high-profile names are likely to join that crusade over the next few weeks.
Meanwhile, the Austrian government has been forced to take control of Vienna’s Bank Medici after it lost a packet on the funds of the disgraced New York financier Bernard Madoff — in which several private Swiss banking houses were also caught up. As David Craig described here last week, even the more reputable hedge funds, towards which the private banking fraternity have directed billions of their clients’ money over the last decade, have been stopping investors taking money out as asset levels collapse. Private bankers are running into some distinctly un-private bother.
For the banking industry as a whole — which frankly can’t afford much more in the way of problems — that matters.
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