In light of September 15th’s “Banking Black Monday”, investors and depositors are in a state of shock. Indeed, many have lost money in the stock market and are desperate to find solutions to preserve their capital. But today the situation is a lot worse. Investors have now lost confidence in their bank and are worried that their savings will disappear in bankruptcies or mega-mergers.
Who’s next on the chopping board after Lehman and Bear Sterns? Merrill just avoided a disaster by merging with BoA. Everyone is watching AIG wipe out billions of shareholder equity, while UBS continues to announce billions of write downs. Fortis had to be bailed out by the Belgian government and what's left of ABN AMRO is being nationalized! Today, selecting a bank is like driving at 200kmph in the fog on Sheikh Zayed Road!
But some banks are sitting pretty! The Swiss private banks, and namely the Geneva Private Bankers, “Les Banquiers Privés” such as Mirabaud, look like havens of peace and safety. With the global financial meltdown, they are now strongly standing out.
Why are they safe? The partners of those banks have unlimited liability, which makes them risk averse. Instead of playing around with the capital of the bank by buying mortgage-backed securities, they leave the capital of the bank in CASH! These banks also do not lend, except to their clients and always secured by portfolios. So they have no exposure to the likes of Lehman.
Since the “Banquiers Privés” are privately held, they do not try to meet quarterly earnings forecast. Hence, they are not pressured into “selling, selling, selling” to their clients and pushing them to make risky investments. They prefer to preserve their clients capital, because their aim is to be profitable and around in 100 years time, not next quarter! Indeed, they prefer to make a little money every year, rather than risking it all for short term profits that turn sour. It’s not sexy, but it works!
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