Bank of New York Mellon adds fee to (very large) deposits

[Newsjock]

Source: Associated Press

Bank of New York Mellon Corp. said Thursday that it will charge its customers a fee to hold cash deposits over $50 million.

The bank said it has seen such a large increase in deposits over the last month that it will charge a 0.13 percent fee to clients with "extraordinary high deposit levels." Bank of New York Mellon, which has $23.6 trillion in client assets under its custody, said customers have moved money to cash as a safe haven in the past month as investments like stocks and bonds have become increasingly volatile.

The bank's customers are mainly large pension funds and money market funds. The bank collects dividends on stocks and holds cash deposits, among other things, on behalf of such large investment funds.

"This is a historic precedent in the U.S. banking system," said Dan Geller, Executive Vice President at Market Rates Insight, a firm that analyses bank pricing. ... Geller believes that the fee on deposits could soon trickle down to consumer deposits too.

Read more: http://finance.yahoo.com/news/Bank-of-New-York-Mellon-adds-apf-3353726022.html?x=0&sec=topStories&pos=1&asset=&ccode=

[eleny]

1. ~speechless~

[Ruby the Liberal]

2. In case the article didn't mention it (I didn't check the link)

it is because their FDIC insurance premiums go up if they sit on too much cash that isn't being lent out.

Not defending them, just explaining that this isn't uncommon when money flees the markets and looks for safe havens in insured deposit accounts.

[eleny]

5. I was sitting here imagining how it would feel to be sheltering 50 mil in a savings account

~speechless~ :rofl:

[Ruby the Liberal]

7. I would be nervous as hell

Only $250k is insured!

:D

[Dover]

13. I don't understand. Isn't there a limit of $250,000 for FDIC coverage?

So what kind of insurance do people with over that amount have for cash reserves?

[Ruby the Liberal]

15. None.

Limit is per person, per bank, so if you have that kind of scratch, open one account for you, one for spouse then move to the next bank, rinse and repeat.

It was $100k prior to fall 2008, but has been amended to $250k after the run on California's Indy Bank in early 2009.

[Dover]

16. Yeah, but surely there's some other way. I mean, how many accounts would you have to open

to store $50 million? Seems like it would be safer invested or in some other currency, in art, in jewelry....SOMEthing other than cash, but what do I know... :shrug:

[Ruby the Liberal]

18. Flight to safety while preserving liquidity.

If I had that kind of cash, I would be looking at commodities (not ETFs/Funds, physical - gold, silver, platinum, palladium) or Indian/Asian currency.

That said, $50mm between 2 people is only 100 banks. You can hit that without leaving Manhattan.

[FreeStateDemocrat]

25. Not quite true as in the case of a married couple it could be $750,000 per institution:

$250,000 joint account,$250,000 in husband's name only, $250,000 in wife's name only and if you have kids and grandkids it continue from there.

[SpiralHawk]

3. Trickle down (R) ? WTF?

Gag me - freaking Republicon banksters have already pissed all over us - and now they are planning even more trickle down freaking piss upon the people

[Deb]

4. Paying to have money made from your money....

Is there a tax loophole for that?

[spin]

6. If there isn't our Congress will be sure to create one. (n/t)

[Ed Suspicious]

8. Geller believes that the fee on deposits could soon trickle down to consumer deposits too.

???

That is freaking hilarious. Hello mattress.

[marasinghe]

12. paying fees to bankers, just so they can use your money to make more money for themselves.

nice racket; the capitalist wet dream taking form in reality.

[Kokonoe]

9. Well, I will make Sure I never deposit over FiftyMillion.

Is Geller suggesting a 30 million fee. Now I'm really mad.:grr:

[stockholmer]

10. very sloppy reporting, Bank of New York Mellon's total assets are $266 Billion, NOT $23.6 trillion

http://finance.yahoo.com/q/bs?s=BK

The bigest bank in the world , BNP Paribas has $2.67 trillion in total assets.

http://www.bankersalmanac.com/addcon/infobank/bank-rankings.aspx

[Ruby the Liberal]

11. Sloppy reporting on several counts.

***Market is tanking! Quick, spew some shit so we can go to press!!!***

:eyes:

[Dover]

14. Is this why the notice I got from my bank today said they are limiting the amount

of cash deposits by non-U.S. residents to $4000?

If not, what IS the reason?

[shanti]

17. offshore accounts

wouldn't that just ensure that people with this kind of cash will just move it offshore?

[Dover]

19. So how does this affect people holding unmatured CD's?

Are they insured? Are they considered cash?

[Ruby the Liberal]

26. CDs are insured as are money market accounts.

Basically, all banking (non-investment) products.

[notadmblnd]

20. They have suckwed all the money they can out of the minnows and guppies pockets

now they're going after the big fish's pockets.

[davidwparker]

21. Have you moved your money to a credit union? I did. n/t

[russspeakeasy]

22. You will note that it said "over" $50 million..

Most of us should be safe. What a country !!

[high density]

23. 0.13% expense ratio

That's not bad for your own private money market mutual fund.

[FBaggins]

24. People need to remember that, to a bank, deposits are a liability

not an asset.

They have to invest the money somewhere (loans, securities, whatever) in order to earn a profit. As noted above, they have to pay FDIC premiums on deposits whether they can invest them or not... but it's also an issue that when a bank's liquidity is measured (and that's a challenge for many of them today), it's as a ratio of deposits. So excess deposits that aren't invested can also harm the perception of their safety. And this isn't a time when a bank can afford that perception to be further damaged.

It used to be that the bank could just invest the money overnight and at least break even regardless of the size of large deposit flows, but how much does a safe overnight investment yield these days? Hint - they're tied to short-term fed funds rates (almost zero).

If they thought this was a reintermediation that implied that the deposits were going to stay for awhile, they wouldn't have a problem... they would just invest it. But the implication is that they expect to lose these amounts quickly.