Banks have begun asking top law firms to transfer their client accounts to them from other banks in order to secure lending facilities, as some partners move their private accounts abroad to gain full protection from bank collapses.

Mark Dean, director in the law firm group at Citi Private Bank, which does business with the ‘top 200’ firms, told the Gazette that ‘all banks are looking to boost their deposits’. He also said some partners have asked Citi to move their private accounts to New York, where the Federal Reserve covers 100% of any accounts earning less than 0.5% interest. The UK Treasury guarantees a maximum of £50,000.

The news comes amid the general tightening of banks’ conditions for lending to law firms, and requests from firms to secure lines of credit where they were once unsecured – thus drawing added scrutiny and special terms and conditions from the banks.

Dean said: ‘We have received a significant amount of new cash deposits from law firms of late and have moved a small number of private partner accounts to New York at their request.

‘Our competitors and ourselves are looking at what else is on the table as part of a deal. We have to use the bank’s capital carefully, and in the current climate we are unlikely to have pure credit relationships.’