By Siow Li Sen
SINGAPORE - Morgan Stanley has received a wholesale banking licence, paving the way for it to accept deposits to help expand its private bank business, and more critically, boost its funding.
The sixth-biggest US bank by assets received approval from the Monetary Authority of Singapore on Feb 13 to operate a wholesale bank here.
Wholesale banks in Singapore are limited to one branch and can accept deposits of not less than $250,000.
A Morgan Stanley spokeswoman confirmed that the firm's wealth management business in Asia was granted a bank licence by the MAS in February and by the Hong Kong Monetary Authority (HKMA) late last year.
'Accordingly, we transferred our Asian private wealth management business to bank branches in Hong Kong and Singapore on 13th February. The new structure will allow us to provide clients with a more comprehensive suite of wealth-management services and a broader and more flexible range of products,' she said.
Historically, Morgan Stanley's Asia private banking businesses in Hong Kong and Singapore were operated through its local entities as a division.
Under the new structure, the private bank business in Asia will be conducted through branches of Bank Morgan Stanley AG, a Swiss subsidiary of Morgan Stanley Smith Barney (MSSB).
'The new structure will allow us to take client deposits and expand our lending capabilities,' said a person familiar with the bank.
Private banks have been particularly helpful in garnering deposits, especially US dollars, to help with funding and expanding their lending business.
Since the 2008 financial crisis, US dollar liquidity has been tight and customer deposits have become invaluable for banks which want to increase their lending activity.
Morgan Stanley is the latest of a slew of foreign banks to expand their private bank operations here.
Singapore's private bank industry continues to grow by leaps and bounds.
The region has more than 3.3 million millionaires and expected wealth creation is at an annual rate of 8.7 per cent for the Asia-Pacific or 12.6 per cent ex-Japan, according to a Capgemini/Merrill Lynch report last year.
A Bloomberg report said Morgan Stanley Smith Barney, the world's largest retail brokerage, with 17,000 advisers and US$1.65 trillion under its management, forms the bulk of the bank's wealth-management division. The broker accounted for US$665 million in profit, or 16 per cent of the firm's total, last year, and generated 41 per cent of revenue, compared with 16 per cent in 2006.
Chief executive James Gorman is trying to reduce risk at Morgan Stanley, reorganising the firm around the wealth management, investment banking and trading businesses.
This article was first published in The Business Times.