Private bankers see crisis boosting transparency

By Gilbert Kreijger

GENEVA (Reuters) - The global financial crisis will boost calls for tougher regulation and greater transparency on banking fees, which could in turn hit some wealth managers' profit margins, bankers to the world's rich say.

"Clients have lost trust and something needs to be done to improve the quality of advice," Sebastian Dovey, managing partner at wealth management consultancy Scorpio Partnership, told the Reuters Wealth Management Summit.

Bernard Coucke, deputy chief executive of ING (ING.AS: Quote, Profile, Research, Stock Buzz) Private Banking said he expected the industry's traditionally healthy margins to come under pressure in the longer term.

"There is pressure of transparency and regulations. Customers will see what margins are. Those of the past will not be accepted in the future," Coucke said.

Patrick du Saint, head of Private Banking Switzerland of French bank BNP Paribas (BNPP.PA: Quote, Profile, Research, Stock Buzz), said there could be a "slight impact" on the profitability of private banking operations as clients would have greater transparency as to a product's real costs.

Bankers said the profitability of their private banking operations had already fallen due to the turmoil in global markets, which prompted many clients to shift funds to products with lower margins such as cash accounts. [ID:nPEK130916]

Not all bankers, however, expected new rules to hit margins.

"We aren't afraid of new regulation. We feel comfortable, we have no concern on fees. The fees we have right now are quite stable and we can maintain them in medium-long term," said Enrique Marazuela, chief investment officer at BBVA's (BBVA.MC: Quote, Profile, Research, Stock Buzz) private bank, BBVA Patrimonios.

Marazuela said he expected new rules to build on the MiFID rules designed to give client's more information about banking products, and especially the associated investment risk.

MiFID was introduced in the European Union last year and requires banks to get a risk profile of its clients and see what products could be sold to them, amongst other issues.

Gerard Aquilina, vice-chairman of Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) Wealth, expected new rules to focus on which products would be suitable for which clients but he did not expect it to weigh on margins.

Bankers also said they expected little impact on banking secrecy, since it was too important a pillar for wealth management in countries such as Switzerland.

"What we're seeing is an evolution of banking secrecy such as the introduction of the European Union withholding tax," said Boris Collardi, chief operating officer at Swiss Bank Julius Baer (BAER.VX: Quote, Profile, Research, Stock Buzz).

BBVA's Marazuela expected banks to be hit with new, tighter regulation next year, which would be enforced on a European level and in consultation with the United States.

"The current crisis is a global crisis. The only way to deal with it is to come with global measures," he said.  Continued...