It's Business as Usual for Greek Banks in London, but for How Long?

In Athens, the lines outside banks are long. At London offices of Alpha Bank and the National Bank of Greece, both based in the city’s central financial district, the opposite is true.

Alpha Bank’s London cashier manned an empty desk on Monday. At the National Bank of Greece’s London branch, the reception was vacant save for a glass case holding a selection of company archives. With Greece’s domestic equities market closed, NBG’s small trading arm was spending time reassuring clients, not trading, according to a person familiar with the situation.

Greek authorities have closed the country’s banking system after talks broke down with creditors, and have moved to impose capital controls. Bank customers are allowed to withdraw just €60 ($66) a day, but many ATMs have run out of cash.

Greek clients of the London-based banks are also not allowed to withdraw cash, but clients in the U.K. can, both in person and online. Lindsay Mackay, managing director at Alpha Bank Limited, said it was “business as usual.”

That may not remain the case for all banks. When Cyprus’s banks were subject to capital controls in 2012, the then-U.K. regulator pushed the nation’s top two banks to change U.K. branches’ legal structures, so it could keep a closer eye on them. That involved the Bank of Cyprus and Cyprus Popular Bank to become subsidiaries, rather than branches, a move that allowed their deposits to be covered by a U.K. deposit protection scheme guaranteeing the safety of deposits up to £85,000.

No such move has been made yet to ringfence the U.K. arms of Greek banks. Piraeus Bank and the National Bank of Greece both manage bank branches in the U.K. Eurobank Private Bank Luxembourg, which also operates in the U.K., is a branch of Luxembourg bank, which is in turn a subsidiary of Greek bank.

A spokeswoman for U.K. Prime Minister David Cameron said Monday that the government’s contingency plans for the Greek crisis would likely look at “impact here in the U.K., either be that on issues around Greek bank branches or subsidiaries or on business.”

A spokeswoman for the Bank of England, which is likely to oversee any moves to ringfence the Greek banks, declined to comment on any contingency plans, but at present Alpha Bank is the only Greek bank with a U.K. banking subsidiary license, which allows clients to be protected by the U.K. deposit protection scheme, and whose deposits are ring-fenced from Alpha Bank’s Greek parent company.

Clients of Alpha Bank have been shifting their money to the U.K. subsidiary to gain “additional security”, Mr. Mackay said. He added that the move has been taking place over the past few years, but particularly since the beginning of the year. Piraeus and NBG’s clients in Greece and elsewhere are protected up to €100,000 by the Hellenic Deposit and Investment Guarantee Fund.

If Greece does leave the euro analysts expect the HDIGF to convert into Greek drachmas.

For Eurobank Private Bank Luxembourg, up to €100,000 is protected by the Luxembourg deposit guarantee scheme.

A spokesman from Piraeus bank said the bank’s offshore branches are “not being affected” by events in Greece. NBG could not be reached for comment. Eurobank did not respond to requests to comment.