05 Dec 07
For much of November, it was almost impossible to get a first- or business-class seat from Singapore to top-end regional resorts such as Bali. The passengers were not early-season holidaymakers.
The private banking business in Asia is so good these days that banks are flying aircraft-loads of customers for weekends away just to say thank-you – whereas in the past they might have sent a year-end gift hamper.
Banking for high net worth clients is one of the fastest growing segments of Asia’s financial services industry. Private wealth in Asia grew 10.5 per cent last year to $8,400bn, according to consultancy Capgemini.
The number of Asians with liquid assets worth more than $1m grew 8.3 per cent to 2.6m last year. Asian private banking is growing fast because more of the region’s millionaires are using private banking channels rather than tying up most of their wealth in property.
The private banking business in Singapore is forecast to grow by more than 30 per cent this year and by 25-30 per cent over the next three years. Singapore is now the world’s number two private banking centre, albeit well behind Switzerland.
The industry estimates that close to $300bn – or about 5 per cent of the world total – of private-banking assets are managed in Singapore, compared with Switzerland’s $1,700bn.
Singapore has transformed from a minnow to a private-banking giant in less than a decade. Six years ago, Singapore took steps to build a critical mass in wealth management and put itself far ahead of competitors such as Hong Kong. It beefed up account secrecy protection, changed its trust laws and allowed foreigners who meet minimum wealth requirements to purchase land and become permanent residents.
“With its excellent infrastructure and regulatory framework, Singapore is uniquely positioned to take advantage of the global boom in wealth management,” says Deepak Sharma who heads Citi Private Bank’s international operations from his base in Singapore.
In 2000, Singapore strengthened its banking secrecy laws, now considered stricter than even Swiss laws. Indeed, banks in Singapore have had to move data centres that handle private banking transactions from Bangalore to Singapore just as commercial banks were moving their own back office functions to cities in India.
Another big new attraction is Singapore’s new trust laws, says Mr Sharma. Some European countries have laws that supersede wills and trusts. In late 2004, the island-republic exempted foreigners who set up local trusts from these limitations.
The new trust laws also attract clients from the Middle East, where shariah courts often pass over wives and children in favour of a deceased’s father or brother.
Assets placed in trusts in Singapore have grown to nearly $100bn from just under $25bn five years ago, say industry insiders.
Little wonder, then, that global giants such as Citi, HSBC, UBS (NYSE:UBS), Credit Suisse (NYSE:CSR) and Societe Generale are boosting their regional private banking operations in Singapore. As are niche players such as Pictet and Clariden Leu.
The number of private banks in Singapore has increased from just 20 in 2000 to 42, while private banking assets have grown from about $50bn in 1998 to over $300bn.
Many newcomers are returnees. The UK’s Standard Chartered Bank, which last year re-entered private banking after a hiatus of more than a decade, made Singapore its global headquarters for private banking.
Others, such as Bank Julius Baer that left Asia in the aftermath of the Asian financial crisis, have returned because they see a larger pool of assets, a more sustained pace of growth, better infrastructure and a friendlier regulatory environment.
Where is the growth coming from? Until recently, Europe was the main driver of Singapore’s private banking growth.
Banks with huge European client bases have promoted Singapore – which imposes no tax on capital gains, interest income or overseas income – as a way around new taxes in Switzerland, where authorities three years ago imposed a withholding tax on some accounts held by EU citizens.
Wealthy Indians are a new growth driver, and have been big forces in up-market residential property transactions across Asia in recent months, particularly Singapore. The boom in Indian stock market and asset prices has created a breed of millionaires eager to park assets outside India.
One private banker says money from India this year has tripled, even quadrupled for his bank. “European business was a big growth driver between 2004 and earlier this year,” says another private banker in Singapore. “Now it’s all of Asia. Mostly India, China and Indonesia.”
Yet after five years of heady growth, some private bankers in Singapore are trying to slow down. “Our biggest challenge is people,” says Marcel Kreis, who heads Credit Suisse’s private banking operations for Southeast Asia and the Pacific.
Singapore has more than 1,000 unfilled private banking positions, says a partner at an executive search firm. Rival banks are pinching staff from each other, often doubling salaries and offering huge joining bonuses.
To tackle the growing skills shortage, Singapore two years ago set up a Wealth Management Institute, which offers graduate and diploma courses.
Banks such as UBS are setting up their own training facilities to prepare a generation of private bankers. “If we have the people, we can continue to grow at this pace, and probably even faster,” says Mr Kreis.