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China: International Private Banking Institutions Essay

2456 words - 10 pages

1. Introduction
In China, HNWIs (High Net Wealth Individuals) who has more than $1 million for investable assets are fast growing. It provides the huge opportunity for the private banking industry. Private banking could be defined in various ways. Basically, private banking means managing all aspects of a customer’s financial life. However, especially in Asia market, it is not only just financial management, also including all aspects of social life and different stages of the life care.
Figure 1. Comparison of private banking and traditional retail banking
Customers Service offering Main
revenue source Person in charge
Traditional banking Mass Financial management Net interest margin ...view middle of the document...

It has been only 7 years since the first private banking services started in China around 2006. At first, foreign banks such as Citi and HSBC started private banking in China even before the regulation was introduced. China's first private bank institution was UBS, opened in Shanghai. Citi private bank opened subsequently in Shanghai in March 2006. Later, domestic banks including state-owned banks have started offering private banking services to their existing customers. In March 2007, Bank of China firstly started the domestic private banking business. Since then, China Merchants Bank, ICBC China and other local Banks as well as a number of foreign banks such as HSBC, SCB have launched private banking business in China.
However, the private banking market in China is not matured yet, so it is still opened to competition. Even though most famous international private banking institutions already have entered in China market, there is not a single ultimate winner yet. Private banking business is challenging to succeed abroad because it is not just about fancy financial products but managing all aspects of a customer’s financial life. It needs to understand customer’s life style, important values as well as financial preference. Wealthy individual’s willingness to entrust external parties with the management of their money is hugely dependent on factors such as culture and trust. Cultural factor has huge impact on private banking business.
Major Korean banks also have entered or are in the process to open the private banking in China. It is the right time for Korea banks to go abroad with accumulated experience and sophisticated skills. Korean private banking market becomes big enough to have various experiences. Korea has the 12th largest HNWI population in the world and the 3rd largest HNWI population after Japan and China in Asia. Korean banks started private banking business in early 1990s. Considering cultural similarities, market environment and experience, Korean banks have competitive edges to compete with international private banking services in China.
In China, there is growing literature on Chinese private banking business. Most studies examined how to develop private banking business in China (Hangzhou Financial Research Institution, 2008; Ying Gou&Ying-Jun Sun, 2012). However, in Korea, there is little research about Chinese private banking industry. Korean studies focused on potential of Chinese private banking business (Korea Institute for International Economic Policy, 2009). They do not provide detailed strategy how to enter China market.
This paper adds value to develop specific strategies for Korean banks. It provides an updated assessment of Chinese private banking industry and establishes suitable strategies. This paper attempts to suggest suitable strategies for Korean bank’s private banking in China. It is organized as follow. Section 2 begins with analysis on potential of Chinese private banking business. Section 3...

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