Definition - What does Private Banking mean?
Private banking is a type of banking and financial service provided by banks to high net worth individuals who have enormous amounts of assets. In this sense, the term private refers to the private customer service offered to such individuals. Existing products and services that are available in mass for retail banking is customized to meet the needs of these individuals.
Private banking is not the same as a private bank, which is a banking institution that has not been incorporated.
Divestopedia explains Private Banking
Private banking is the earliest form of banking. The first banks that emerged in Venice, Italy helped wealthy families to better manage their assets so that their wealth could be passed on to the next generation. As the middle class grew, there was a need for a different kind of banking that was more geared towards this class. However, the original concept of banking remained in servicing wealthy individuals and this is what is known as private banking today, which is distinguished from retail banking.
Private banking services are offered to individuals who have a net worth of $5 million or more. To help these customers make the most out of their investments, private banking includes services such as portfolio investment suggestions, wealth protection, tax filing, and guidance about general financial planning that includes donations, inheritance, asset management and more. Private banking services are offered by most investment banks, though there are some private banking firms that offer the same services as well.
Private banking is also subject to scrutiny and regulations, especially after the Great Recession. As a result, the new regulations demand more transparency in operations, especially when it comes to charging fees to clients.