I just received a notice from the bank saying non-U.S. residents now have a limit

[Dover]

of $4000 US dollars/cash they can keep on deposit. Furthermore, they have declared they can change that amount at their whim without notice.


So tell me, why are they doing that? Is it for the same reason that NY Melon bank is charging
fees to hold cash? Or does it mean the bottom is about to drop out of the markets?

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...cont'd

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

[pnwmom]

1. That's weird. Why would they want to limit the amount

of cash non-residents can keep on deposit?

I heard about the Bank of New York, but that's a different situation.

[Dover]

2. Strange indeed. Perhaps there are a lot foreigners holding dollars

after pulling out of the market? Odd that there was no explanation given.

On edit. Maybe this explains it (from the NY Mellon bank article). I think it IS the same situation. Mellon is charging a fee for large deposits. This bank has just handled it differently by reducing services to foreigners and, at least for now, not adding fees to their resident clients for the privilege of holding their money:


"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.

Normally, banks pay interest to customers for deposits. But with short-term interest rates near zero, and increased FDIC insurance premiums on deposits, it hurts banks when they hold large amounts of cash on their balance sheets. Deposits are considered a liability because they can be withdrawn at any time. When liabilities go up, banks pay more for FDIC deposit insurance.

Geller believes that the fee on deposits could soon trickle down to consumer deposits too. He said the same economic conditions and nervousness are impacting the American people as managers of pension funds.

"At some point, the safety and security of an insured cash deposit becomes so appealing that people will be willing to pay a small premium for that," said Geller.

[customerserviceguy]

5. Interesting

I hadn't considered this fully until I read your post, thanks for putting it up.

I've got 100% of my 401K money in money market funds, which pay nearly nothing. I get more interest on my HSA than I do on the 401K, and I have about 75% less money in the HSA. I've wished that the 401K would just find a "mattress fund" to stuff the money in, and stop charging management fees for near-zero return.

FDIC insurance certainly has a premium cost, whereas money market funds don't. I wonder if credit unions pay as much for their insurance as banks do to the FDIC.

[Hawkowl]

11. Deposits are liabilities

Deposits are not assets to a bank. The bank is trying to limit it's exposure to overseas financial turmoil, i.e; Europe. The bank has probably recalculated how much cash they may need to pay out to its depositors in the US due to the impending market collapse and decided that it can't risk additional foreign liabilities if it can barely meet the domestic ones.

This is different from BNY, but along the same vein. The pieces of the puzzle are coming together and they are pointing towards another economic catastrophe. Probably the only reason the markets haven't fully collapsed is due to it being August. Most of the Wall Streeters are on vacation and everything is at 1/4 speed. Now after Labor Day.....

[PoliticAverse]

3. What bank ? n/t

[provis99]

4. even banks want to tax the rich!

[dixiegrrrrl]

6. Are you saying that they cannot have MORE than 4,000 in the bank????

Which bank are you talking about?
I ask because if it is a BIG bank, which would be likely to have a LOT of "foreign" depositors, then one explanation would be the same as Mellon: the more cash a bank has, the more money in premiums it has to pay to the FDIC for insurance.

[Dover]

8. What they say it means is that if you are a non-resident, the aggragate amount

of US dollar CASH deposits that may be made into one's account during any calendar month is limited to $4000. It does not apply to deposits made by check or other non-cash deposits.

It's BBVA-Compass. I think they would be regarded as medium sized, but not sure about that.

[dixiegrrrrl]

7. I did find this, which underscores how much cash is flowing into banks:

"Since the beginning of this year through July 20th, holdings of cash in United States commercial banks surged 85 percent, or $912.7 billion, to $1.98 trillion, according to the Federal Reserve".


"In a sign of just how much cash had poured into commercial bank accounts, Bank of New York Mellon said on Thursday that it would charge institutional clients with more than $50 million on deposit a fee of 13 basis points. The move is intended to recover some of the cost of managing the money, but is also a bid to slow the so-called hot money that has been ricocheting between Treasuries, money-market funds and pure cash balances at the big banks.

The Bank of New York Mellon said the fee would only be applied “to a small number of institutional clients with extraordinarily high deposit levels where the deposits have increased significantly in recent weeks, well above market trends.” The bank did not disclose just how much cash had poured into its coffers recently.

Over all, banks took in nearly $200 billion between mid-June and mid-July as institutional investors fled money market accounts and sought the safety of accounts protected by the Federal Deposit Insurance Corporation, according to Joseph Abate, a money market strategist at Barclays Capital."

http://www.nytimes.com/2011/08/05/business/nervous-investors-chase-low-risk-assets.html

[OHdem10]

9. The Big Investors on Wall ST are taking money out of the Sreet

to cash. These Investors are loaded, so some Banks are
creating Fees to charge them for their very large deposits.

As I understood the report, these are very wealthy and so
their amounts would be very large. Apparently Europe already
do this.

[Dover]

10. So how do they secure these big sums of cash

when the FDIC limit is well below the amounts they want to deposit?


As regards the notice from my bank, I also wonder if there is some FDIC rule regarding foreigner depositers that might have influenced that decision.