Reuters Summit-Private bankers fret over cost of new rules
By Ian Simpson
GENEVA, Oct 7 (Reuters) – Private bankers face higher costs as a wave of regulation forces them to spend on infrastructure and more staff, executives told the Reuters Wealth Management Summit.
But if past clampdowns are any guide, rules to avoid a repeat of the financial meltdown could also mean more market opportunities for private banks, they said.
“We are in a regulation frenzy these days, it comes from all sides. It is often useful, sometimes a bit zealous,” said Francois Reyl, chief executive of small Swiss bank Reyl & Cie.
Regulatory costs have increased by between 50 to 100 percent in the last five years, he said. Private banks may have to set up specialist teams for regulatory paperwork in some countries, such as the United States, putting them off limits because of the costs.
Although bankers at the summit gave no estimates of the cost of new rules, Felipe Godard, managing director of JPMorgan Chase & Co Private Bank, said regulation was an important factor.
“You need need to have an infrastructure to allow you to participate in today’s environment”, he said, noting such items as due diligence and anti-money laundering rules dubbed “know your customer”.
Among rule-tightening moves, the Financial Stability Board — set up by the Group of 20 advanced and emerging economies to coordinate national reforms — is working on a more regulated market for derivatives, stronger accounting standards, strengthening banks’ capital and expanding oversight.
In the United States, Congress is debating a bill to create an agency to protect consumers from risky financial products.
Guillaume Lejoindre, managing director of SG Private Banking (Suisse) SA, said regulators’ pressure and controls were driving up operating costs and thus the break-even point.
“This is why … very small operations will see mergers,” as they look to streamline costs, he said.
The higher regulations carry a silver lining, however, since they can bolster client confidence and force better results for customers.
“It is my view that regulators have played a very important part in this business,” said Francois Debiesse, head of wealth management at France’s BNP Paribas SA. “Regulators have pushed our business towards creating value for clients.”
(For other news from the Reuters Global Wealth Management Summit, please click on http://www.reuters.com/summit/GlobalWealthManagement09?PID=500)
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