07 August 03
Financial Consultant
.....Citibank is concentrating on its "VIP"
clients in the affluent class ie JPY100m
plus of financial assets. They are offered
a full range of Citibank on-shore products
and the emphasis is on return not only for
the clients - but also for Citibank by its
generous commission and fixed charge structure
to nickel and dime the clients quite satisfactorily
- Citibank has been in Japan for a century
and has localised exceptionally well: a fully
Japanese product in all meanings of the term,
yet while still trumpeting its "foreigness"
- a very clever piece of marketing presentation.
Even cleverer is the Citibank acquisition
of the Diners Card Japan franchise. In Japan,
Diners is at the top end of the card business:
members have to be over 33, own a house,
be at least a bucho in a listed company,
have at least ten years management of an
unlisted company etc.....will take in anybody
off the street and then plays around with
green, gold, platinum colours etc. However,
there is just the one Diners card in Japan.....
08 August 03
Financial Educator
.....Citibank as a foreign bank has promoted
itself vigorously and uses a financial planning
story also, but essentially just markets
its own financial products using the Diners
Card data base.....Crudely speaking among
the foreign players, Citibank is just touting
its in- house products to the Diners card
client base complete with commissions hidden
and otherwise. It is not clear that Citibank
is making much of a show of offering even
entry level private banking services such
as estate planning. For so-called private
banking, Citibank holds some remarkably public
seminars.....
11 August 03
Welfare Consultant
.....An old friend from Sanyo days is now
doing something at Citibank in private banking
which means apparently punting clients into
SITs etc which is retail business. Any personalised
off-shore private banking seems to be handled
under the current regime out of Hong Kong.
Citibank itself, like any foreign company,
has blown hot and cold on Japanese private
banking having put a lot of personalised
clients underwater through unwise off-shore
property schemes - Gold Coast, Hawaii etc
- during the Bubble and its aftermath. Personalised
private banking got transferred off-shore
in the mid-1990s and private banking erased
from the corporate history, only to be resumed
again in the late 1990s as on-shore retail
private banking.....The friend is probably
as unsure of his future as anyone in financial
services.....
14 August 03
Private Banker
.....Among the usual suspects, Citibank's
apparent success is noteworthy: but for all
the wrong reasons. A new hire has been decided
from Citibank and this supports the Bank's
story perfectly: the excellent man coming
on board has been unhappy about the sell-side
nature of Citibank. From the outside, Citibank
does indeed look successful and is up there
in numbers, results, seminars and general
razzamatazz. However, from the inside there
is clear client disquiet about it being localised
as a Japanese-style securities house complete
with shades of Japanese-style client churning
and burning for commissions and other charges
purposes. Fixed charges are strongly objected
to and hidden commissions and turns are the
Japanese way. The Bank is countering Citibank
by a policy of total transparency in costs
- cost accountability - and in the quality
of the client carry service. There is a mix
of SITs, hedge funds and private equity opportunities.
There are no local funds. It is a clean on-shore
client-oriented operation.....
20 August 03
Bank Planner
.....Citibank had run an off-shore-style
private banking operation on- shore Japan
in Otemachi from the mid-1980s, but had managed
to put a lot of clients underwater and the
whole thing got closed down/moved off-shore
ten years later. Then in a typically sudden
foreign switch, and within a mere three years
at that, it all got re- opened again as an
on-shore-style operation on-shore Japan in
the same Otemachi area: in fact diagonally
across the big Eitai-dori crossroad from
the prior location and just inside Marunouchi.
Citibank is going for the top-end customer
using the Diners Club member list. At the
same time, several of the retail branches
were closed and there was a surreptitious
shedding of the low-end customer base. Citibank
is clearly looking at the affluent base,
fuyuso, and giving them favourable product
terms. This is the petit rentier class the
so-called puchi shisanka. No doubt Citibank
on its home turf cannot pick and choose so
easily and has to get involved with the US
mass market and boring settlement business
etc. Overseas it can pick and choose its
strategic options and is so doing. Another
example of foreign management blowing hot
and cold in rapid succession is Citibank's
entry into the housing loan market: at the
same time as re-entering the Private Banking
field, there was lot of the usual razzamatazz
in the specialist press about Citibank entering
the housing loan market honkakuteki/in a
big way. This seemed to mean, in practice,
Citibank starting buying market share by
dumping housing loans in the late 1990s.
Then suddenly after a mere three years again,
it stopped and starting wrapping up the loans
in securitisation packages and selling them
off. It is now out of the home loans business.....
25 August 03
Foreign Private Banker
.....Coming in as an investment banker or
as a Citibank is not private banking.....is
offering high risk products to a selected
few and Citibank is aiming at the retail
market and offering middle risk products
to the many and both are in their own ways
confusing what private banking is in people's
minds.....is very low profile now. Citibank
remains excessively high profile. The various
parts of Citibank fire off with their various
products and it is a very localised operation:
not much better than what the Japanese institutions
are providing quite frankly. It is wise to
stand back and look at the global trends
of regulation: overwhelmingly the regulatory
emphasis is on protecting the buyer of financial
products in the reasonable assumption that
the seller has the edge in sophistication
and can exploit institutional credibility
and standing. Therefore, and obviously, client-focussed
Asset Protection Services offered through
an account with a licensed on-shore trust
bank are the way forward. While in Japan
the matter is not being viewed systematically,
the same forces are possibly even more extreme
as disintermediation tips the ultimate investor
out of bank deposits into securities and
even worse into derivatives. Citibank is
force feeding its clients its in-house products,
not only is it like a Japanese securities
house complete with sales targets, noruma,
etc, but it has got the regulatory trend
wrong as it is clearly emphasising its own
interests so strongly. It is apparently successful
as it has clearly isolated a moderately affluent
class and big money is being turned over.
It is a distortion of the concept of private
banking and is little better than what the
churn-and-burn securities houses offered:
only the Japanese brokers at least tailored
the product into a great variety of lot sizes
for effective client segmentation. Neither
Citibank nor.....is putting the trust bank
at the centre of their private banking efforts:
Citibank is just the Citibank catalogue of
products as above and.....would appear to
have an even weaker catalogue of products
- deposits, forex and loans. Neither offer
personalised services.....The trust banks
offer seminars on estate planning, will trusts
etc, but potential clients are wary about
being seen at such gatherings as the word
soon gets around that they are "in the
market" and they then get pestered as
listings get copied around.....Obviously
Citibank product selling is part of the pestering
problem. There is just a simple conflict
of interest. There has been the Bubble damage
done to private banking in Japan: Citibank
was notably active in that market with at-the-worst
forex unhedged oversea property acquisitions
in Japanese micro-markets - Gold Coast, Waikiki,
etc - funded on loans against Japanese property
collateral that itself went South with the
Bubble. Now there are the derivative products
being sold to people who think they are getting
a bargain, but are being locked into 15 year
blocked products that will spell disaster
when interest rates normalise. Once again
Citibank is active so there will be unwanted
private banking fallout. Customers are not
sophisticated and do not understand the complexities
of the hedge funds etc being offered. If
one has been in finance for any length of
time, then one develops a nose for what is
reasonable. Immediately one is into stripped
bonds and multiyear lockaways it is obviously
fishy. The schemes are all the same. Isle
of Man insurance bonds for the expatriate
market are just one of many of these fishy
products that are designed to generate high
commissions for the seller and so inevitably
have to squeeze the buyer.....
26 August 03
Private Banker
.....Private banking in Japan.....quickly
becomes something like Citibank and the retail
marketing of standard financial products
to a moderately affluent customer base.....
27 August 03
Private Banker
.....Citibank is promoting its in-house SIT
and derivative products pretty aggressively
by all accounts. As the branch of Citibank
NA which has a large balance sheet, fairly
hair raising sizes of loans are also made
to clients even to gear up on the SIT and
derivative products. The loan business is
particularly high margin and, while this
kind of aggressive US-style private banking
is profitable for Citibank, it exposes the
client to massive risk. If interest rates
were to normalise "accidents/jiko"
would soon occur in Marunouchi. That is quite
clear. Am very critical of what Citibank
is up to. It is creating the makings of a
lot of adverse publicity about private banking
in Japan. This is playing into the hands
of the NTA that wants to keep the extent
of private banking activities restricted.
Citibank has got Cititrust which used to
do some private banking work for the largest
clients, but that has been switched over
entirely to wholesale and individuals have
been dropped. Given the variety of services
that can be conveniently offered through
a trust bank, that Citibank decision tells
a lot about the quality of Citibank private
banking.....
29 August 03
Private Banker
.....There is Citibank that is trumpeting
about private banking, but its business is
at bottom just the worst of the noruma practices
of the old brokers. It is a disgrace. The
leveraged structured products will eventually
blow up in any normalisation of interest
rates scenario.....
29 August 03
Financial Planner
.....The US-style of private banking really
means churning the client for commission
revenue purposes. There is a conflict of
interest and calling it private banking is
a cheek. Citibank writes it "private
banking", but it is pronounced "securities
marketing". They are aiming at the puchi
puchi shisanka having financial assets of
JPY30m/40m and working them on the old noruma,
sales target, system. Know a fair amount
about Citibank because several of the personal
clients are families spread between Japan
and the US and they have accounts with Citibank
for purely JPY/USD bank cash card convenience.
They are bombarded with product offers in
their account statements. It is rather like
the local supermarket and the special offers
of the week stuffed into everyone's mailbox
on a Monday morning.....
03 Sep 03
Tax Accountant
.....People are always looking for the Holy
Grail of low risk/high return and complain
when they don't get it! Citibank is pandering
to that psychology with its structured products
and allegedly principal guaranteed etc. Am
very critical of the advertising that is
leading people astray and will lead to large
losses on any normalisation of the interest
rate situation. There should be some financial
equivalent of the medical concept of informed
consent! Citibank benefits from the strength
of its US name value among a certain class
of people. It is the old story, that in the
battle of vested interest which has been
the Japanese system, the producer interest
wins against the consumer interest every
time. Citibank has a learnt a trick or two
and joined them rather than fighting them!.....
17 Sep 03
Private Banker
.....It is a question of means and ends.
The private banker should clearly see the
ends of private banking as preservation of
family wealth, preservation of reputation,
control of family breakdown etc and the means
of private banking that are the catalogue
of products, services etc. It is an issue
of professionalism and the "Doctor's
Dilemma" as highlighted by George Bernard
Shaw. Citibank private banking is under a
man who is a go-getter type and reputedly
comes from a securities background. A close
friend from LTCB days is manfully working
there, but personally would not view it as
private banking as it should properly be
understood. They are pushing product and
are all means and no ends. It is a retail
securities operation and it is difficult
to believe that they have any real leverage
over the decision making of any half-way
intelligent "flow" wealthy individuals.
It is easy to manufacture attractive financial
products, if you put your mind to it, and
then there is the interest in recouping the
investment by pushing them.....There should
be the readiness to outsource whatever the
client requires: that is what is done at
the Bank and is the so-called European approach.....As
opposed to the so-called US approach of pushing
your own in-house product a la Citibank.....
22 September 03
Securities Manager
.....The foreign banks, notably the ever-high
profile Citibank in its prior Otemachi private
banking incarnation, had become also involved
in these gearing loans and in the handling
of the execution of general off-shore property
investments, larger scale DOI Forex Act provision
off-shore/off-shore gifting tax avoidance
schemes, smaller scale gifting by-hand of
bearer bank debentures etc. These foreign
banks got cold feet about the reputational
risks involved. Already there were negative
vibrations by the early 1990s as on- shore
property collateral values plunged. Then
from the mid-1990s, slowly the NTA investigations
about "missing" family assets on
the passing of an estate started and there
were also messy court cases brought by aggrieved
clients placed under water. It was something
of a nightmare for much of the foreign senior
management. A very clear line was drawn.
The accounts were either closed or moved
entirely off-shore and placed at client risk.
They were, and still are, serviced, if at
all, by the "fliers" accustomed
to handling such client risk accounts from
the old pre-Bubble days. Private banking
is now more sedate: the management of financial
assets with estate planning, tax efficient
structures, off-shore vehicles etc.....emphasis
on absolute return and structured products
is to avoid downside risk simplistically
and is a retail approach to marketing on
a one-off basis - it will not get anyone
very far in the long run - it is the current
positioning of Citibank. It is all about
the product - the means - and not the process
- the ends - of private banking and family
wealth preservation etc. In the 1980s Citibank
was marketing the one-stop banking idea in
the US and failed and that is what they are
now trying in Japan. There is the conflict
of interest of moving the products that you
have invested in yourself via their production
etc. Private banking targets are at the top
end of the education spectrum and are aware
of the conflicts involved and cannot feel
happy with such a retail service. Doubt will
move to rejection after some bad experiences
and/or bad publicity. In summary the leading
foreign players are : Citibank retailing
in-house product and hopelessly conflicted.....
16 October 03
Financial Planner
.....Many of the products peddled by the
likes of Citibank are structured and hedge
products and there is the "informed
consent" issue. The material pushed
under the nose of the prospective client
is some really badly translated version of
some foreign language contract with a lot
of small type, long convoluted sentences
and let- out clauses. The whole thing blows
up and the let-out clauses are suddenly made
apparent. The client naturally feels he has
been comprehensively bilked, kono yaro!/yarareta!!,
but nothing can be done. There is not yet
a sufficient number of people with the experience
to build up a critical mass for the rumours
to spread and become a social issue.....The
attitude must be the long term relationship
and that means a low cost relationship as
otherwise product-pushing obtrudes. Given
the poor trend of tax revenues, the overall
impression is that the NTA has been getting
more difficult rather than less. Specifically
in inheritance tax things have recently got
quite difficult with a filing that would
previously have gone through without any
investigation now leading to investigation
and even audit. Possibly this is part of
the general trend of the NTA getting more
difficult and exacerbated by NTA concerns
about the impact of the first round of cowboy
private banking products now surfacing in
inheritance tax filings as the estates start
to pass. Citibank has a lot to answer for
in that respect as is so widely known in
the market.....
16 October 03
Foreign Private Banker
.....The largely unremarked oddity of the
current piece is Pictet. It is a mere skeleton
office in Tokyo and has near-zero market
profile, but truly massive Nikkei etc media
interest and coverage. Maybe the Geneva museum
piece that is Pictet private banking has
been selected in some strange bureaucrat
decision to have Pictet as the acceptable
face of foreign private banking: it is so
small scale and so unthreatening. There is
the implicit heavy criticism of the US- style
with Citibank in the pole position running
through the pro- Pictet articles. If the
authorities were to move on Citibank big
time, as they apparently had for.....small
time, there would be the cover of Pictet
to demonstrate that it is not just a prejudice
against foreign private banking per se, but
a reasonable prejudice against inappropriate
products and inappropriate marketing and
all in the interests of bona fide investor
protection.....
31 October 03
Government Bureaucrat
.....
Q
Is it correct that the IAC-licensed private banking players such as.....are
favoured over the bank-licensed private banking players such as Citibank?
A
There are no restrictions on the entrance
of foreign financial institutions into the
Japanese financial markets and so when a
foreign financial institution enters it must
choose whatever particular licensing form
appears to suit its market strategy. Advising
customers on their investment portfolios
or undertaking discretionary fund management
means an IAC licence II or I respectively,
while actually soliciting for foreign currency
deposits and purchase of financial products
in concentrating marketing efforts on the
wealthy means a banking branch licence. Which
particular licensed form of operation chosen
determines the relevant legal requirements
and a fair and transparent supervision and
inspection regime is maintained.
Q
What would be the response to a SITMC + IAC licensed financial institution
that marketed deceptive financial products?
A
Deceptive, gokai sareyasui, is rather
a loose expression. If for example
the registration documents and prospectus
contained factual discrepancies
with the actual products in question,
penalties under the Securities and
Exchange Act would be considered. If
there were no such factual discrepancies,
but if intentional loss were caused
to customers, penalties under the SITMC
Act or other relevant act for breach
of duty to the customer would be considered.
Q
What would be done if a bank were to market deceptive financial products?
A
Penalties using the Bank Act, Financial Products Marketing Act, which has
provisions for alleviating loss, investor protection etc, and other relevant
legislation would be considered. A record of pursuing banks that have marketed
deceptive products under the Bank Act has been established with Business
Improvement Orders, Business Suspension Orders, Bank Licence Revocations
etc
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