Greek banks steer spooked clients to put cash in funds

By Simon Jessop and George Georgiopoulos LONDON/ATHENS (Reuters) - As Greeks, fearful their country is heading for a default, withdraw billions of euros from banks, those lenders are fighting to limit the fallout by steering clients towards investment funds. Athens, in a war of words with international creditors over its debt repayment plan, looks unlikely to meet obligations due at the end of June, leading to growing concern it may default and then leave the euro zone. That in turn has spooked citizens who are worried the government will stop them from accessing money held in bank accounts. On Friday, 1.2 billion euros (£0.86 billion) was withdrawn from the banking system, sources said, to take this week's outflows to around 4.2 billion euros. While the head of the Greek central bank has said the system is stable, the European Central Bank said it did not know if Greek banks would be able to open on Monday. Greece's four big banks, National Bank of Greece , Alpha Bank , Eurobank and Piraeus Bank are keen to keep as much of their clients' money on their balance sheet, even if not in a current account. The most obvious option, given each has an asset management arm, is to encourage clients to put their cash in an in-house money market fund, which would be less likely to be affected by capital controls - at least in the first instance. "This practically converts a bank deposit into units/shares of a mutual fund and the client may get some peace of mind. The objective of the banks is of course to keep the client and his money within the group," a Greek banking source said. "As the bank remains the custodian of its fund management subsidiary, the client's money stays in the group and in the Greek banking system." More cautious clients, however, are asking for their money to be sent out of the country to funds run out of Luxembourg or Dublin by international asset managers with which the Greek bank may have a distribution agreement. Among the firms involved in this were JPMorgan Asset Management , Amundi, Goldman Sachs and Pictet, he said. JPMorgan and Pictet declined to comment, while the others were not immediately able to comment. "In this case, the only thing the Greek bank gains is the 'ownership' of the client (and the hope that) at some point he will talk again with the Greek bank for any next move on his money and not with the fund company abroad," the banking source said. "The Greek bank hopes that at some point it will tell the client, 'things have now normalised so bring the money back'." Given mutual fund flow data can lag by weeks, it is impossible to identify how much Greek retail cash has been parked in such mutual funds over the last week or so. (Additional reporting by Jeremy Gaunt and Nishant Kumar; editing by John Stonestreet)