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Yesterday Bank of New York Mellon made headlines with its plan to start charging customers for holding large cash deposits, but banks in many countries including Canada are almost certain to follow suit, analysts say.

 

“Banks are under pressure to maintain profitability so this is just a novel approach that players are going to employ to raise revenue,” said Tony Demarin, chief investment officer at BCV Asset Management Inc. in Winnipeg which oversees about $300-million.

 

Faced with near-zero interest rates and declining demand for credit, lenders everywhere are scrambling to turn a profit and some are resorting to unorthodox strategies. The situation is exacerbated by a surge of new money flowing into bank accounts as investors liquidate stock and bond holdings in a bid escape the ongoing market turmoil.

 

“It will happen,” said Paul Gardner, a portfolio manager at Avenue Investment Management in Toronto. “Banks have got to make an economic return. If you’re not making a rate of return you must charge rent.”

 

BNY Mellon, a leading custody bank in the United States, sent out a letter to its major clients earlier this week warning that large cash deposits will be subject to a 0.13 percent fee as of Aug 8.

 

“Recent market events such as the Greek debt crisis and the uncertainty created by the handling of the U.S. debt ceiling have caused many of our clients to alter their cash management strategies, resulting in sudden, significant increases in… U.S. dollar deposits,” the bank said.

 

The move to introduce a fee for large deposits is a way to cover fixed administrative and other costs that don’t move down with with interest rates, it added.

 

A spokesman for RBC Dexia Investors Services, another leading custody bank that is jointly owned by Royal Bank of Canada and Dexia, said it has no plans to charge for Canadian deposits “at this time.”

 

CIBC Mellon, a joint venture between Canadian Imperial Bank of Commerce and BNY Mellon, was unable to comment by Friday afternoon.

 

Custody banks specialize in safeguarding customer assets such as securities but typically they don’t charge for holding cash.

 

Speaking in an interview with Bloomberg, Bill Gross, head of bond fund giant Pacific Investment Management Co., said the move by BNY Mellon to charge for deposits is “unheard of.”

 

Mr. Gross blamed it on low-interest rate policies espoused by governments and central banks across the world. Describing it as “financial repression,” he said current rock-bottom interest rates benefit governments by reducing debt servicing costs but punish savers who get no benefit from holding onto their money.

 

“The fact is for the next several years, maybe for the next decade, financial repression will take place and you will earn much less than the rate of inflation on your savings deposits,” Mr. Gross said.

 

(Courtesy of the Financial Post)

 

:confused::confused::confused:

 

Okay, I pay the bank like what $4 a month. That 0.13% for someone that has $50 million the bank, is going to lose like $65,000 per month ($780,000 per year). I have a feeling many people that deal with custodian banks, will look somewhere else. I guess the banks had to go after their largest customers.

Edited by jesseps
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Encore un bel héritage de notre système ultra capitaliste où la seule raison d'être des entreprises est le profit à outrance.

Je le dit encore une fois, un jour, ce système vas frapper un mur. C'est impossible de faire plus de profit année après année quand on a exploité toute les sources possibles.

 

Il faudrait un peu de logique aux stupides actionnaires et qu'ils acceptent que l'entreprise ait la même cible que l'année dernière. Ça éviterait (en partie) que des millions d'emplois soient délocalisés et que la qualité de nos objets soit aussi médiocre qu'elle ne l'est aujourd'hui !

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Encore un bel héritage de notre système ultra capitaliste où la seule raison d'être des entreprises est le profit à outrance.

Je le dit encore une fois, un jour, ce système vas frapper un mur. C'est impossible de faire plus de profit année après année quand on a exploité toute les sources possibles.

 

Il faudrait un peu de logique aux stupides actionnaires et qu'ils acceptent que l'entreprise ait la même cible que l'année dernière. Ça éviterait (en partie) que des millions d'emplois soient délocalisés et que la qualité de nos objets soit aussi médiocre qu'elle ne l'est aujourd'hui !

 

En même temps, c'est à nous de nous en passer si ça ne fait pas notre affaire. Les entreprises ne font pas de l'humanitaire, elles font de l'argent : à nous de décider lesquelles doivent survivre et lesquelles doivent mourir.

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En même temps, c'est à nous de nous en passer si ça ne fait pas notre affaire. Les entreprises ne font pas de l'humanitaire, elles font de l'argent : à nous de décider lesquelles doivent survivre et lesquelles doivent mourir.

 

Le système capitaliste est un système économique de développement. Cependant, quand il n'y a plus rien à développer, il doit se recentrer à augmenter l'efficacité. Si l'efficacité ne peut plus être augmentée, alors le système devient de plus en plus cannibal.

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