Bank of New York Mellon Corp. said it is being overwhelmed with deposits from investors fleeing risky markets, and said it will begin charging for above-average deposits.
The bank said this week it is unable to invest the "sudden significant" deposit increases because of their "transient nature," but it is concerned the deposits will weaken its capital ratios and raise its deposit insurance premiums.
If customers' balances are more than 10 percent above their averages in June, BNY Mellon said it will pass along some of its costs by charging the fee.
The fee reflects how global economic uncertainty spurred investors to pull assets from risky assets, creating difficulty in some stock and bond markets.
Traders said demand for U.S. Treasury bills soared on Thursday, as depositors drew down their balances and bought government securities. One-month T-bill rates dipped below zero.
BNY Mellon said the dislocations were likely temporary.
"Past history shows that once the storm passes, these deposits quickly return to the markets," BNY Mellon said. It cited the U.S. debt ceiling debate and the Greek debt crisis as having spurred clients to deposit more cash.
The charge amounts to an annual rate of 0.13 percentage point, with adjustments if one-month T-bill rates fall below zero. It will affect accounts whose average deposit is greater than $50 million.
BNY Mellon is a custody bank that offers securities, trading, and trust services to institutions, corporations, and wealthy individuals. It does not operate retail branches.
The bank urged clients to reduce their deposit balances and "to consider a variety of cash investment options to minimize any effect on you."
BNY Mellon said the fee is effective as of August 8 and will be calculated monthly.
"Recent market events such as the Greek debt crisis and the uncertainty created by the handling of the U.S. debt ceiling have caused many of our clients to alter their cash management strategies," BNY Mellon said.
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