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OPINION

Private banking: Coping in a crisis

What is the point of hoarding cash when not even the local convenience store takes it anymore?  

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During a recent interview with a senior London-based private banker, talk turned to how much one learns at times of great crisis by observing how colleagues and clients react.

His view was that lessons absorbed at moments of real market mayhem and financial panic accelerate learning of one’s trade – and demonstrate how easy it is, even for seasoned and supposedly level-headed professionals, to descend into blind panic.

To bolster his point, he recalled a senior City banker ringing him at the height of the global financial crisis in 2008 with an unusual request: “He said, ‘I’m coming to your headquarters with two suitcases.’”

The man turned up toting a pair of cheap duffel bags and demanded the bank bring forth two stacks of bills, one in pounds sterling worth £250,000 ($339,000) and another in euros, to the value of €150,000 ($170,000). He stuffed them in his bags and left.

“It brought home to me how frightened even senior financiers can be in that kind of moment,” our private banker said.

Nevertheless, as the client departed, the ever-diligent private banker took care to warn him that with that amount of cash at home, it would probably void his home insurance policy.

Today's alternatives

More than a decade later, the idea of keeping your cash in duffel bags at home during times of uncertainty looks positively anachronistic. No-one takes cash these days – so what would the anxious banker of today have done?

If the last 10 years have demonstrated anything it is the resilience of high-end real estate, so maybe that would be the answer. He could buy a 39% share in the single parking space snapped up in June 2021 for HK$10 million ($1.28 million) by a resident of Hong Kong’s exclusive Peak district. He might even get most of the front door of Amberwood House in London’s Knightsbridge, once home to legendary ballerina Margot Fonteyn, and on the market for a cool £75 million.

[Today] the idea of keeping your cash in duffel bags at home during times of uncertainty looks positively anachronistic

But that seems a little pedestrian in 2022. As of February 3, $510,000 would buy him around 14 bitcoins or 192 Ether, according to CoinDesk.

Virtual racehorse ownership is also an option thanks to Zed Run, which calls itself the “future of digital racehorse ownership”, and lets you build a “star-studded” blockchain stable of equines.

But maybe our nervous banker would today be embracing the metaverse. On February 3, a cyberpioneer splashed out $450,000 to become Snoop Dogg’s neighbour in his interactive world. He – for it is surely a man – will be able to hang out with the rapper’s avatar in his Ethereum-based ‘Snoopverse’, where residents can spice up their looks, homes or cars with non-fungible tokens.

We have come a long way since Lehman’s collapse. But sometimes it feels like stuffing bank notes under the mattress might not be a bad plan after all.