By Andrew Hurst, European Banking Correspondent
GENEVA (Reuters) - A global credit crunch in financial markets has given many of the world's wealthy a lingering distrust of new-fangled "structured" investment products, even though many are no worse off.
Private bankers attending a Reuters Wealth management Summit in Geneva, said they believed the legacy of a liquidity crisis which seized up lending between banks and spooked investors would be to make the wealthy even more reluctant to put their money in instruments they could not readily understand.
The credit crisis was triggered by a meltdown in the U.S. market for subprime mortgage loans -- extended to borrowers with shaky credit histories -- which many banks packaged into complex bundles of securities and then sold on to investors.
"To the extent that things are called exotic, I think there is going to be less appetite for those," said Peter Flavel, Global head of private banking at Standard Chartered Plc.
Demand for mortgage-backed securities, many of which received triple-A ratings from leading credit risk agencies, dried up over fears that exposure to subprime loans had undermined their intrinsic worth.
"My general rule is that if you cannot understand it in the first minute or two it's probably too complex to be selling and we tend to keep to the simpler structures," said Flavel.
One of the features of the credit crunch, which caused outright panic in markets in August, has been the complexity of the financial structures which set it in motion.
Many investors realized belatedly that they had put their money into investments they simply did not fully understand. Continued...
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