US bank BNY Mellon yesterday said so many investors were storing short-term cash with it as they fled market turmoil that its balance sheet stability was under threat.
The bank said it would levy a new charge on cash deposits higher than $50m (£30.6m) after a crash in market confidence saw investors making “extraordinarily high” deposits.
Investors have fled from riskier asset classes including equities as US and Eurozone states wrestle with sovereign debt burdens.
Deposits have swelled as “investors en-masse de-risk and become highly liquid”, BNY Mellon said in a letter to clients, resulting in “sudden, significant increases” in its balance sheet.”
“The transient nature of these new deposits prevents us from investing our balance sheet to cover the costs from regulatory ratios and deposit insurance,” it added.
The new fee will be 0.13 per cent, but could increase if one-month Treasury bill yields go below zero.
“We have notified certain clients with extraordinarily high deposit levels that we will begin implementing a 13 basis point fee on the excess deposits,” BNY Mellon said in a separate statement.