Eversheds Moves Its Cash in Fear of Collapse

United Kingdom

Eversheds Moves Its Cash in Fear of Future Bank Collapses

U.K. firm angers some banks with its cash-protection measures

Claire Ruckin

Legal Week

Eversheds has moved at least 18 million pounds ($29.8 million) of firm and client money into different banks to offer protection in the event of further financial institutions failing.

The law firm has transferred the bulk of the funds since October 2008, cutting back the number of institutions it uses from around 20, including Investec, to six U.K. clearing banks -- including Barclays, HSBC, Lloyds and Royal Bank of Scotland.

The move has strained relationships with some of the banks, with some understood to be sending Eversheds less work as a result of their frustration at seeing millions of pounds of deposits withdrawn.

Eversheds chief executive Bryan Hughes said: "As a business we made a decision following the banking issues of last year to move the firm's and client funds into the main U.K. clearing banks where funds are guaranteed by the U.K. government. Our priority had to be to protect our client's money. It was a no-brainer for us."

He added: "We all hope the position becomes more stable and then we will have cause to consider our position again."

Other firms are also thought to have made similar decisions as a result of the financial crisis that has claimed names such as Northern Rock and seen others, such as RBS, being bailed out by the government.

The lack of confidence in the banking system has also seen firms moving their deposits across a wider range of institutions, with one London firm confirming that it now spreads its money across three banks rather than holding it with a single institution.

BDO Stoy Hayward head of professional services tax Colin Ives said: "Most firms have been looking at where they deposit their own and client funds. A lot of firms have moved their client money around from banks that would be deemed a higher risk. In addition firms have been spreading the money out so it is not all kept in one place."

Last October the Law Society issued guidance for law firms concerned about client accounts, warning firms to mitigate against a bank's collapse by moving client money to more secure banks and use multiple accounts to further reduce risk.

That same month Addleshaw Goddard paid equity partners their last two drawings from the 2007-08 financial year early because of concerns that it may not be safe leaving the money in the bank.

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