BNY Mellon denies overcharging clients on FX trades

Calculating feesBNY Mellon says two lawsuits that allege it overcharged customers over ten years by misleading them about the price of currency exchange transactions are “wrong on facts and law”.

The lawsuits, which form a $2 billion (€1.5 billion) compensation claim, were filed by New York federal and state prosecutors and target the bank's “standing instruction” service, which buys and sells currencies to institutional clients.

The lawsuits say BNY Mellon consistently exchanged currencies with its custody customers at low rates, while obtaining better prices for itself and pocketing the difference. But in a company statement, BNY Mellon claims that it offers “wholesale” prices that are significantly better than its customers could achieve from other providers. It says its clients and their investment managers make the decision about when and how to execute foreign currency transactions and claims that if its rates were not competitive, clients would not use its service.

The dispute comes as a blow to BNY Mellon, which like most custodian banks is struggling in an environment of low interest rates and increased pressure on costs.

“The attorney general's lawsuit ignores the benefits our standing instruction service provides to our custody clients and their investment managers, who freely choose to use it,” said the company in a statement. “The attorney general is in essence attacking BNY Mellon for operating a profitable business, suggesting that we should provide our valuable FX services at cost – something no rational commercial institution would do.”

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