How private banking works

[Joe Flacco]

https://www.wsj.com/finance/banking/morgan-stanley-bankers-were-pressured-to-approve-mortgages-for-wealthy-clients-378092ae?st=jBYYgu

 

[TerryRohrer]

And yet some people don't think any staff appraisers are pressured into reaching conclusions favoring the interests of others, and certifying otherwise.

 

[Joe Flacco]

So are the financial advisors the LO in private banking? Or do the financial advisors earn fees for referring the customer to the mortgage banker who is the LO? Who are "mortgage employees" exactly?

 

[Joe Flacco]

I don't understand why there would be standard guidelines at all for customers with $20 million - $100 million. You would think it would be case by case basis each time.

 

[TerryRohrer]

Anti-Tying and Conflict of Interest Rules

• • Section 106 (12 U.S.C. § 1972): Broadly prohibits a bank from extending credit, varying loan terms, or furnishing services on the condition that the customer obtain additional services or products from an affiliate or another department. Pressuring a lending unit to approve a substandard loan purely to secure wealth management business can cross into improper conditioning or coercive practices. [1, 2]
  • Fiduciary Duty and Regulation 9 (12 CFR Part 9): Requires national banks exercising fiduciary powers to establish clear internal controls and operating policies to prevent self-dealing and impermissible conflicts of interest. Wealth management personnel are bound to act in the best interest of trust/wealth beneficiaries rather than leveraging bank credit systems improperly. [1, 2]

Underwriting Independence and Soundness

• • Safe and Sound Operations: Federal banking regulators (Federal Reserve, OCC, FDIC) require that commercial and mortgage lending decisions rely strictly on independent, objective underwriting and risk-management standards. [1, 2, 3]
  • Internal Controls: Banks are expected to maintain "ethical walls" or structural reporting separation so that revenue-generating sales staff (like wealth advisors) cannot override risk-management or credit-approval processes in lending departments. [1, 2]