Bank Charges for Deposits as Investors Panic

So many big investors are fleeing stock market turmoil for the safety of bank accounts that money market rates have dropped below zero and large amounts of cash have become a nuisance for at least one institution. Bank of New York Mellon, which specializes in handling cash for corporations and financial institutions, has told clients that deposits of more than $50 million made since last week will be charged a fee, the Wall Street Journal reports.

The bank says it has little chance of reinvesting the funds for short-term profit, and the flood of cash has raised the cost of insuring deposits. Analysts say the move is highly unusual, but other banks are likely to follow suit, possibly pushing investor cash into mutual funds. "I suspect more banks will do this for their wholesale customers, saying, ‘We love you guys but every dollar you put in here costs us money,’” a banking consultant tells Bloomberg. “I’m not sure that this has ever happened in the US." (More stock market stories.)