Private goes a little public: Lisa Vaughan reports on a new mood at Britain's most exclusive banks

WHAT a difference a decade makes. In the 1980s, the frock-coated providers of exclusive financial services for Britain's wealthy were absorbed with the problems of affluence. Visiting sheikhs would request cash on silver platters for shopping sprees while wealthy City gents made rich beyond their dreams by Big Bang demanded immediate facilities to take care of spontaneous purchases like a new Porsche or a country manor.

In those days, private banks could afford to be choosy about their customers and the snob factor was part of their exclusiveness. The job is harder now. Private bankers may have discreetly to advise customers on how to thread their way out of a financial tangle, to cope with the shrunken values of their property and business assets or to fund a cash call from Lloyd's.

Some private banks, including Coutts, Britain's biggest, and Adam and Co, the small Edinburgh-based bank, have made pre-tax losses in Britain. Nearly all have had to extend emergency loans to some customers to help them through the recession.

None the less competition is growing. Even Barclays, swimming in red ink from huge property losses, opened a new private bank in Mayfair in January.

The attractions of banking for the rich are straightforward. After the lending disasters of the 1980s, financial institutions want safer sources of income. Private banking's bread and butter comes from fee-based services, such as investment advice and moving money between countries, rather than risky lending propositions.

'Banks haven't generated returns from other businesses in the recession and they are looking to generate better ones,' said Ian Woodhouse, a consultant specialising in private banking with the accountants Price Waterhouse.

The market also looks lucrative because the number of high-income individuals in Britain is growing, said David Macguire of Lloyds Private Banking, launched in 1985. This decade many babyboomers are inheriting estates or businesses, creating a new class of high-net-worth individuals who need and want advice on managing their money. Business owners selling up and recipients of retirement packages and handsome golden handshakes add to the pool - as do those fed up with declining quality of service from high street banks. 'More people are prepared to pay a bit extra to bank with someone like us because the clearers have downgraded their service,' said Henry Hoare, chairman of the family- run C Hoare & Co Bankers in Fleet Street, London.

Neither recession nor competition has changed the strict financial criteria private banks require of their customers. But amid increasing rivalry for well-heeled customers, domestic private banking is going for a wider audience. For some banks, this means moving downmarket. Today more private banks cater not only to the super-rich, but also to the moderately rich and even the merely well-off. Coutts does it, Lloyds does it. Even Royal Bank of Scotland's London private bank, Child & Co, is considering a broader approach.

Clearing banks have also discovered that they can make more money offering customers above a certain income, often pounds 50,000, a classier kind of service than they can through the ordinary high street branch.

James Laurenson, managing director of Adam & Co, warned that private banks' renowned quality of service can suffer if they attempt too much. 'Maintaining quality is more difficult when you get bigger,' he said. 'But if you don't grow, you die.'

Some are even sullying their hands with advertising. Child & Co, whose historic building near Fleet Street's Law Courts is decorated with handsome antiques, is planning its first ads in selected magazines. But it admits to being wary of the response. Bernard Gould, the local director, has calculated that domestic private banking caters to the richest 1 per cent of the British population. 'But 30 per cent of the population would like that type of service. The question is, can you do it at the service level and a price that would be meaningful for us?'

According to Inland Revenue figures published last year, about 53,000 people in Britain have more than pounds 500,000 in liquid assets, excluding homes, pensions and insurance. About 160,000 people have more than pounds 250,000. But moving down to the pounds 75,000 level, the market mushrooms to 820,000 people. And 1 million individuals, half of them retired, have liquid assets of pounds 50,000. Focusing on the lower end of the upper crust with 31 branches nationwide enabled Lloyds Private Banking to become the second-biggest domestic private bank, after Coutts, in eight years.

Mr Macguire of Lloyds said: 'In UK private banking, there was double-digit growth in 1991 and 1992. Other clearers are seeing that customers want the focus on better service.'

But don't be fooled by this downward push. You still need some fairly serious money to consider opening an account at a posh private bank. The criteria vary, but most require a minimum annual income of pounds 50,000. At Child & Co, a customer must keep an interest-free average balance of pounds 1,500; at Lloyds it is pounds 3,500. But these minimum current account balances are deceptively low. High fees for ordinary services such as stopped cheques inflate the cost of holding a private bank account.

'We have no set figure for balances, income or capital . . . but our charges are higher so unless people really want the extra service, they are better off going to a clearing bank,' said Mr Hoare of that ilk. Barclays Private Banking Division, which focuses on asset management and has no cheque accounts, has a pounds 500,000 minimum, guaranteed to keep away the riff-raff.

Generally UK private banks aim to preserve customers' wealth and spending power. Basics include all financial services available at a clearing bank, plus tax advice, investment planning, school fee provisions, share dealing, valuations and drawing up wills.

But the extras are what count, and clients differ in what they want. Tea and freshly ground coffee in china cups or the silver service, deep carpets, and expensive surroundings come with the territory. Customer lunches in the banks' elegant dining rooms help to maintain the personal relationships on which private banking prides itself. The most famous customers often want the least possible fuss made over them, and like to bank over the phone.

Coutts, whose doormen and qualified bankers still wear their trademark frock coats at the bank's modern, glass-enclosed London headquarters, is known to be banker to the Queen. In business for 300 years, it has had some unusual requests. Its senior bankers have hand-delivered a Christmas pudding to a client in France, and accompanied clients to art auctions. Last year Coutts sent a crew to sail a customer's boat back across the Atlantic from New York. Last-minute dashes to Heathrow with a customer's forgotten spectacles are not so rare.

The smaller private banks are smug about their records during the recession. Hoare's and Child's, with minimal customer borrowings, boasted stable income. But the flip side is that during a boom the takings from private banking can look pretty stodgy compared with lucrative lending deals.

(Photograph omitted)