Bank of New York: You Pay Us

NEW YORK (TheStreet) -- Investor demand for liquidity took a new turn today as Bank of New York Mellon (BK) confirmed it will start charging customers 13 basis points for cash deposits in excess of 110% of their normal balance.

As investors seek safety in cash, BNY said the recent flood of deposits was affecting its capital ratio and insurance fees as the unpredictability of the duration of new deposits meant it was unable to redistribute the cash into loans and investments in the way it normally would.

"The transient nature of these new deposits prevents us from investing our balance sheet to cover the costs incurred from sudden and significant increases in U.S. Dollar Deposits," the bank said in a letter to clients earlier this week.

In a brief statement released today, BNY acknowledged the move and said it would likely reverse the charge in the coming months if the current cash-on-deposit trend eased.

"In the past month, we have seen a growing level of deposits on our balance sheet from clients seeking a safe haven in light of the global interest rate and credit environment," said a bank spokesperson. "As markets stabilize, we expect deposit levels will trend lower as they are redeployed into the markets. At that time, it is likely this fee will no longer be necessary," he added.

The new fee will affect clients with current month deposits of $50 million or more from Aug. 8.

Yields on one-month Treasury bills -- the shortest maturity issued -- dipped below zero Thursday to yield -0.01%, effectively putting a premium on liquidity.

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