LUXEMBOURG (Reuters) - Banks may have thought of their own pockets more than their clients when telling them to move money into safe cash deposits, in a bid to shore up liquidity and boost profit margins, a senior banker said.
Many investors have transferred money from equity funds into cash funds in recent months -- a move widely explained by a flight from risky assets.
But this was also a boon for banks, Massimo Tosato, vice chairman at Schroders Plc (SDR.L: Quote, Profile, Research, Stock Buzz), told the Reuters Fund Summit.
"In some countries it was driven by margins, in other countries it was driven (by banks' desire) to rebuild their balance sheet and improve liquidity," Tosato said.
Banks often buy products from rivals for their clients, but straightforward money-market products are normally generated in-house, which yields a higher margin. And more client money in cash boosts banks' liquidity, Tosato said.
"A client under management (is) below the line. If the same client sells the mutual fund and places a time deposit with you as a bank, that's liquidity on your balance sheet."
There had been a strong move towards cash and time-deposits in commercial banking in the last 12 months rather than managed savings.
Tosato said he did not know if the trend was primarily caused by banks looking after themselves rather than client interest. But he did not rule it out either: "It could have been," he said.
(For summit blog: http:summitnotebook.reuters.com/)
(Reporting by Douwe Miedema; Editing by Quentin Webb)
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