This is an expanded definition to cater for the operational needs of private banks. Once we have defined who qualifies as a “Private Banking Customer”, the next step is to consider specific measures that would help make private banking more “user friendly” without compromising the need to accord appropriate protection to private banking customers. First of all, let’s talk about suitability assessment. The HKMA agrees that private banks need not mechanically match their client’s overall risk tolerance level to product risk level. This is because in private banking, customers often look to their private bankers for investment advice on a continuous basis having regard to the customers’ entire portfolios or balance sheets. This is quite different from the retail end of the market in which one-off sales transactions are common. We therefore consider that suitability assessment for private banking customers can be conducted on a holistic or portfolio basis, taking into account all the relevant circumstances of the customers. For example, as long as the portfolio allocation and the overall risk level agreed with the client is adhered to, a low or medium risk tolerance client buying high risk products that only constitute a minor proportion of his portfolio is not necessarily a “mismatch”. The same principle applies to some other aspects like investment tenor and concentration risk of AUM with any individual private bank because the entire portfolio of the customer will be taken into account. Also, we agree that the documentation of rationale for recommendations need not be on a per transaction basis.
To create value for their clients in this challenging business environment, private banks need strong teams of professional staff, from the front end to the back office. Both technical competency and ethical standard form the basic components of the professionalism of our industry practitioners. The HKMA encourages the industry to promote a competency framework for new entrants and on-going professional training. The financial market is very dynamic and rapidly changing. The industry therefore should ensure that staff are well-equipped with the necessary technical and market knowledge and skills in performing their jobs. It is also fundamental for private banks to act in the best interests of clients at all times. The HKMA therefore encourages the industry to promulgate a set of professional and ethical standards that are designed specifically for the private banking practitioners. I know that the industry is moving towards this direction. HKIB has been providing professional qualifications like Certified Financial Management Planner. In 2011, the Hong Kong Securities Institute (HKSI) also introduced the Certified International Wealth Manager programme. These are well-organised programmes that help enhance the technical competency of industry practitioners. On a separate front, we very much welcome the industry’s proposal to set up a new industry body called “Private Wealth Management Association”. I also support the initiative to further upgrade the professional standards of industry practitioners by developing a new competency framework for wealth management.