Private Banking in 21st Century Spain: An Introductory History

At the start of the 21st century we began to talk about "private banking" in Spain as a way to identify entities that served very wealthy clients, seeking to find products for their financial savings with a good combination of profitability and risk. This private banking had little to do with the dominant one in the 20th century, where the concept was simply opposed to "public banking". The large deposit banks created private banking sections, to distinguish it from "personal banking" (for well-off, but not wealthy, clients) and the rest of commercial banking. This segmentation worked well until the outbreak of the Global Financial Crisis in 2008, where wealthier clients felt they were not receiving the special treatment they expected, as they did not represent but a small fraction of the interests at stake. It was time for independent private banking. This working paper provides a historical interpretation of the phenomenon of private banking today, exposing its roots in European merchant banks and US investment banks and the difficulties of this kind of banking to succeed in a country like Spain, where the stock markets had little development before the 1988 reform.