(Newswire.net — November 23, 2015) — Whether considering starting a merchant bank to deal with initial public offerings (IPOs) or a financial institution that is retail-focused dealing with over-the-counter transactions, the opening of any kind of bank can lend a great deal of additional credibility to a financial organisation.
Preferential Banking Terms Offered To Existing Trade24 Customers
Trade24 is looking into the possibility of starting their own bank. The idea is that it might be called “The Traders’ Bank” or something similar to elude both the financial company’s roots and also that it will offer preferential banking rates for its existing currency trading Trade24 customers.
This will be seen as good news for currency traders looking for better rates than leaving cash sitting in trading accounts at money market rates which typically only pay 0-0.5 percent per annum on cash balances held overnight.
With the VIP customers, it is expected that customer support would be considered beyond reproach. A dedicated banker will be available to advise the VIP clients about their investment portfolio held with the bank, recommend alternative investments, and perhaps provide some much needed counsel during times of market turmoil.
A Variety of Savings Accounts Expected
Savings rates are typically based around long-term deposits, whereas traders tend to look at returns over a much shorter period of time. It is expected that this new bank will offer some competitive savings accounts that will be aimed more at immediate to short or medium-term deposits, rather than only from the perspective of one or multi-year commitments.
This approach to savings accounts will be at odds to how traditional retail banks usually offer savings accounts with immediate access, monthly notice accounts, and single or multi-year deposit accounts being the most common savings accounts offered to the banks customers.
Dual Banking Role is a Real Possibility
Beyond a customer-focused retail banking arm, it is also possible that Trade24 may look into creating a separate merchant bank. The idea behind a merchant bank is that it is able to deal with institutional clients like pension funds, endowment funds, wealth funds, OEIC funds, UCITS funds, property funds, and REIT funds.
Merchant Banks Handle Different Types of Customers & Business Opportunities
Merchant banks are typically involved with initial public offerings (there is an unsubstantiated rumour that a new Trade24 merchant banking arm might have dealt with a Ferrari IPO if it was already operational). Merchant banks can also become involved with follow-on financing, bridging loans, and mezzanine financing for startups between financing deals (where one loan is ending and another hasn’t been put in place to repay the first loan yet).
Wealth Management Would Be the Next Step Up
A wealth management role is often played by merchant banks. Banks like UBS in Switzerland, Cap Gemini, and other top-tier financial institutions often deal with wealth management for large companies lacking an investment department, act as an advisor for investment funds, and after advise family office wealth management.
Family Office Wealth Management Consulting Could Be Lucrative for Trade24
In the case of family offices, there are said to be more than 1,000 family offices managed on behalf of wealthy families that run their generational wealth much like an endowment fund would wish to do.
It is to be expected that should Trade24 go into the merchant banking sector, wealth management would be a key new role given that they already provide currency exchange trading, and other investment opportunities. This type of expertise is likely to lend itself to a wider application with an expansion of the appropriately qualified staff to explore this new role.
Location Is Yet To Be Determined
The location of the retail or merchant bank is yet to be determined. There is talk about locating the bank in the heart of London, England. However, Paris has also been mooted as a possibility because of its history with European banking over the centuries.
It should be noted that at the present time Trade24 is mostly involved in business across Europe as the company has no American customers. This suggests that a financial centre such as New York is unlikely to be chosen as the future location for the bank. London still remains a banking capital and therefore it is the most likely location for the Trade24 bank.