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SCMP Reporter

IT came as no surprise when the Hongkong Bank group, ranked as one of the largest banking organisations in the world, decided to establish itself in Luxembourg.

   After all, Hongkong and Luxembourg have some things in common and a strong banking sector is one of them.

  But when the Hongkong Bank group first went to the Grand Duchy of Luxembourg in the heart of Europe, it went there under a different name.

  It bought up an existing bank and operated under the name of Wardley Bank Luxembourg.

  Wardley itself was a private bank under the Hongkong Bank group.

  There was, however, one constraint. The Luxembourg-based bank had only Wardley Bank customers as its clients.

  In 1991, it expanded, becoming a wholly owned subsidiary of HSBC Holdings instead of a subsidiary of Wardley and changing its name to HSBC Bank (Luxembourg).

  The Hongkong Bank group has three destinations in Europe for private banking business. They are Switzerland, the Channel Islands (since the purchase of Britain's' Midland Bank) and Luxembourg.

  While these were competing centres, they were also complementary, said John Haddon, the managing director of HSBC Bank (Luxembourg), who was in Hongkong recently.

  Mr Haddon visits Hongkong every three months to personalise the relationship with his bank's customers.

  He said that each of these three centres catered to a different group or class of customers.

  The Channel Islands and Guernsey operations were meant to attract British expatriates.

  Switzerland appealed to the mega-rich, while Luxembourg had a niche for those with liquid equity of US$100,000 or more.

  ''Our bank is a private Luxembourg bank dedicated to international investment management and to the protection of private clients' personal assets and individual wealth,'' said Mr Haddon.

  In the tradition of many private banks based in Europe, HSBC Bank (Luxembourg) advises clients throughout the world on all aspects of personal wealth.

  Customers choose Luxembourg as a home for their personal investment portfolios because this small sovereign state has a long established history of being secure and politically stable.

  Moreover, it has strict banking secrecy laws.

  But so has Switzerland and it, too, has been politically stable for decades. So, why not invest one's personal wealth there?   There was a good reason for that, said Mr Haddon: while Switzerland might be regarded the world over as the grandfather of private banking, its commissions were high.

  Luxembourg had increasingly become attractive to those who wished to squirrel away something for a rainy day.

  Mr Haddon said Hongkong customers were price-conscious and so Luxembourg offered everything they wanted at a cheaper price.

  Over 65 per cent of the bank's customers are from this part of the world.

  The bank's representative office in Hongkong is able to provide its customers with a personalised service, constantly attending to customers' needs.

  All customers' portfolios are represented in Luxembourg. The representative office here is purely administrative.

  ''The representative office acts as an intermediary between the bank in Luxembourg and local clients, offering customers a point of contact as an alternative to dealing directly with the bank in Luxembourg and local clients,'' said Mr Haddon.

  While many Asian-based investors thrive on the volatility of Asian markets, a large number look to diversify a portion of their portfolio.

  Mr Haddon said that the primary consideration of Hongkong-based customers was to diversify their liquid portfolios.

  ''The risk profile of customers here is very conservative. Their interest is in the preservation of their capital and getting decent deposit rates.''   With that in mind, those with assets who want to diversify seem to find HSBC Bank (Luxembourg) just what they need.

  That is probably why the balance sheet in this Luxembourg bank has doubled in the last year.



Banking on stable history