Faced with a torrent of cash from customers looking for ways to escape the market turmoil, some banks have begun charging major depositors to hold their cash.

Bank of New York Mellon Corp., a leading U.S.-based custodial bank, said in a note to clients this week that it will introduce a new fee on large cash balances effective Aug 8.

As corporations and institutions move their assets to safe havens such as cash, players such as BNY Mellon are seeing a surge in deposits. Between mid-June and mid-July demand deposit and commercial savings deposits grew by nearly US$200-billion according to Barclays Capital analyst Joe Abate.

Such deposits typically earn no interest but are covered by U.S. deposit insurance, a cost the banks must cover.

BNY Mellon said it will charge .13% on abnormally large cash deposits with an additional fee if the yield on a one-month U.S. Treasury Bill falls below a certain point.

Custodial banks safe-guard a variety of customer assets but do not normally charge for holding cash.

Many players have been affected in recent months as skittish customers began liquidating stock and bond investments in a bid to escape fallout from the debt crisis in Europe and ongoing trouble around the U.S economy. In normal markets custodial banks make a profit by investing cash from deposits but with interest rates pushing closer to zero that's becoming a lot more difficult.