Private banking & corporate governance efficiency : a comparative study of business models in private banking

Abstract

Corporate governance is of primary importance in Private Banking. Since the client needs to ensure that the bank acts in his best interest, the choice of the banking institution to manage his wealth is primordial. In this paper, we argue that current business models in the wealth management industry show considerable discrepancies when it comes to corporate governance efficiency. Following a review of various governance mechanisms our results suggest that, some business models in the private banking industry are more efficient than others to align the interests of the bank with those of the clients. Eventually, a careful due diligence has to be undertaken before the client chooses its wealth management services provider regarding governance issue. We conclude that the best business model in private banking is dependent both on governance efficiency and on the client’s characteristics