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#1487814 - 12/31/10 01:20 PM
Re: Private Banking
Cornfed Turtle
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10K Club
Joined: Oct 2000
Posts: 10,180
Toano, VA
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You already have private banking--the handful of ultra-preferred customers who are handled personally by your CEO. Eventually, this portfolio grows and must be passed to another officer who has the time to pamper these (usually) profitable customers. I say "usually" because private bankers are motivated to say "yes" to anything and everything a client can think of, AND provide the accommodation at a bargain basement price.
Never lose sight of the fact that the core purpose of private banking is consumer service--not commercial. While most if not all of these folks own and operate businesses, the private banker's focus is their personal needs. Those needs and demands may be high end, but they're still "personal, family, or household" in nature.
High touch services with custom pricing is the antithesis of consumer protection regulations, which (like communism) assume there's a crime if some customers receive preferred treatment and others do not. After many years of supporting an aggressive private banking unit, my advice is to keep a close eye on three issues: - TIL - AML - Fair lending
Custom credit services can lead to TIL disclosure nightmares. My private bankers specialized in deals that were structured like commercial loans. These credits were serviced on our commercial loan servicing system, so they could do almost anything imaginable. Unfortunately, our TIL-generation systems were not geared to all of these practices. After trying various DIY disclosure solutions (unsuccessfully), I gave up and told them to call me every time they needed to do a disclosure. I crunched the numbers with Excel and other tools and produced the TILs by hand. Yes, this was time-consuming, BUT it ended the need to do corrective actions (including reimbursements) and ended criticism from our regulators.
Private banking customers and their business interests are successful and wealthy. As they transact their businesses and move money around, they sometimes set off AML warning alarms. You don't want to give them a pass, but your private banker(s) know a great deal about their clients that can help you resolve AML suspicions quickly and quietely. The time for specialized AML training is BEFORE something happens, not during an investigation. Your BSA officer should adopt a "drop everything" policy whenever a private banking client is under review. These matters are ultra-sensitive and demand your most careful handling.
Fair lending poses a constant threat. Private banking customers are pampered because they are wealthy--whether or not they have streams of income and credit profiles that resemble typical consumers. Review your fair lending policies to be sure they are broad and flexible enough to provide a meaningful standard for this elite group of customers. Focus on "C"apital. In order to be a private banking client, a person must have accumulated a good deal of capital (wealth.)
_________________________
...gone fishing.
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#1488227 - 12/31/10 09:51 PM
Re: Private Banking
Kathleen O. Blanchard
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Diamond Poster
Joined: Mar 2006
Posts: 1,323
"...Somewhere in Middle Americ...
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Thanks to you both, so much. I met with our new Private Banker this morning. I wanted to get a feel for what would be handled in this area and how my audit plan would be affected. (I’m still debating adding a line item to the audit plan.) His major concern - - - the TIL! I almost laughed out loud thinking back to these responses you provided this morning.
Your first sentence, Richard, is something I hadn't thought of! We have provided "executive" lines to our business customers utilizing the commercial software to get us documents. I think a lot of these customers will be visiting with our new hire now. New guy thinks that his docs should be coming from our consumer system regardless of amount and/or weirdness of repayment streams. He is accustomed to seeing differences based on dollar amounts, but I don’t know if our system is that sophisticated. Our Loan Processing Supervisor and our Compliance Officer are both on vacation, but I think we are going to have to test a loan thru the ol’ lending software upon their return. What fun!
We are getting an outline together of stds for private banking. (And yes, you can read this as “he talked; I scribbled.”) We’re going to establish another pricing sheet for Private Banking as well. And, as I expected, another Home Equity Product will be on the horizon. The ones we offer to the masses will not be flexible enough for this group - - - and the rate will be too high. We currently do not allow any exceptions to our HELOC programs, so…..we’ll need to design a few new “private only” ones. And yes….make sure we offer those programs to everyone in private banking. I’m still a little concerned about the “fairness” aspect. I’m sure there will be the guy meeting the criteria that didn’t get in and the guy that did get in based upon some influential relationship. I think I just talked myself into adding an audit of private banking to the list. 
Thanks again and Happy New Year!
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#1488436 - 01/03/11 05:28 PM
Re: Private Banking
Kathleen O. Blanchard
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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If you can keep the lines not secured by real estate above $25,000 you would be okay on those "exec" lines.
And hope and pray that no one ever decides to let the customer add their home as collateral to the gigantic private banking personal line for tax purposes. What a mess.
$50,000 will be substituted for $25,000 above by July 21, 2011.
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John S. Burnett BankersOnline.com Fighting for Compliance since 1976 Bankers' Threads User #8
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#1488799 - 01/04/11 01:35 PM
Re: Private Banking
Kathleen O. Blanchard
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10K Club
Joined: Oct 2000
Posts: 10,180
Toano, VA
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And hope and pray that no one ever decides to let the customer add their home as collateral to the gigantic private banking personal line for tax purposes. That's the very first thing our customers told the private bankers--"If you won't take a mortgage on my home (regardless of purpose, size & unusual terms of LOC), I'll take my business elsewhere." Recognizing that we had no choice, the private bankers, loan servicing staff, and I agreed that we would have to service these PBLOCs with our commercial loan servicing system (which was incapable of generating any type of TIL disclosure), and produce the periodic statements by hand. I wrote a crude BASIC program that would accept all the dollar, date, and rate information for the billing period and then crank out a Reg Z-compliant periodic statement. It wasn't pretty. It was VERY time consuming each quarter. It made our private bankers happy. They explained this strange document to their customers and pitched it as evidence that we were committed to doing whatever it took to earn their business. I would have paid for a picture of the expression on the face of the first Fed compliance examiner who stumbled across one of these accounts! Apparently, he'd never seen manually-prepared periodic statements for open end credit accounts. Go figure!
_________________________
...gone fishing.
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#1595085 - 08/23/11 01:53 PM
Re: Private Banking
Cornfed Turtle
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Platinum Poster
Joined: Nov 2003
Posts: 530
Midwest
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I'm reviving this string to get some feedback related to this topic...
We have a proposal where certain lines of business want to waive certain fees, sometimes automatically, for our private bank clients. From a Fair Lending perspective, I have concerns with this practice because we would be providing a different level of service for the affluent customers but not for our customers who don't have as much wealth. So, the customers who can afford the fees related to a service wouldn't be charged, but those who may not be able to afford a service, such as replacement credit card or card rush fee, may not choose the service because the cost is too steep.
I'm looking for something to support our position that this should not be permitted, but I'm not finding much since income is not a prohibited factor. My concern is the next fee they'll want to waive is late fees! Any help would be appreciated.
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