And in such difficult times, there is a spillover effect into their private banking portfolios. Some wealthy clients have lost money. Others are quitting the big banks because they are spooked about remaining with institutions that have lost so much money, or they are not interested in the investment products on offer.

DBS Group Holdings' Hong Kong operation reported a 9 per cent fall in first-half earnings. The drop stemmed from a 55 per cent increase in its provisions - to HK$338 million. This was partly to cover loans to private banking clients engaged in trading who had suffered market losses in the past three quarters.

'We made some provisions for clients who leveraged on the Hong Kong equity market, and we took a conservative approach,' said Amy Yip, chief executive of DBS Bank (Hong Kong). 'There may be changes in their appetite for risk, but I don't see that the business was shrinking.'

And private banking portfolios are getting pinched in other ways, too.

Hang Seng Bank, the largest local lender, announced a 44.5 per cent decline in wealth-management income in the first half of the year. Assets under management declined 10.5 per cent mainly because of volatile market conditions.

'Following strong growth last year, private banking was adversely affected by weak investment sentiment,' the lender said in a statement.

Ruffled by fears of economic slowdown and volatile markets, international banks are calling for a more defensive investment strategy to win confidence from their high-net-worth individuals, who typically have US$5 million or more in liquid assets.

'Economic data released in the past couple of months has painted a much gloomier picture. The situation now has made it extremely difficult in advising any appropriate investment strategy,' said Kam Shing Kwang, a market manager with the JPMorgan Private Bank.

'We are advising our clients to put funds into very defensive plays, like cash or cash equivalents,' she said.

While many average bank customers are skittish about the stock market, some of Hong Kong's richest residents see the current conditions as perfect for buying.

'We do not only profit in bull markets,' said Andrew Fung, head of insurance and investment at Hang Seng.

'Some of our customers may go for aggressive short selling, and we provide them with products tailored to fit each individual circumstance. But a messy market calls for more discipline. Our customers are generally betting on some low-beta, defensive products. Currency is one of the most popular choices.'

High-net-worth individuals are moving assets to smaller firms that largely avoided the subprime crisis because they were not involved in all the business segments - investment banking, trading, money management - that the multinational players were.

According to Private Banking International magazine, UBS had about US$1.6 trillion in private banking client assets under management versus just under US$1 trillion for Credit Suisse at the beginning of last year. Citing analysts, it said invested assets could drop by half at UBS and Credit Suisse in 2008 compared with 2007, largely because of the credit crisis. The companies declined to comment.

Some boutique private banks are pouncing on the clients of big banks suffering after the subprime mortgage debacle.

'Most wealth-management operations that are part of a large-scale investment banking group have faced or are facing credit crises,' said Jean de Haller, partner and head of private clients at Lombard Odier Darier Hentsch. 'The cross-selling motives constitute a conflict of interest that puts client interests at stake.'

While larger banks employ derivative techniques through their proprietary trading arms and underwrite financial products, boutique firms generally keep to more trust services.

Moreover, even if they do engage in derivative trading, they are likely to be more immune to big meltdowns that have plagued the bigger private banks because they are not underwriters, traders or originators.

Clients have moved around also. 'Honestly, we have watched some of our high-net-worth clients leaving for bigger banks along with the sizzling stock market last year,' said Mr de Haller.

'Now the stock market's slide is helping us to restore the trust of our clients.'