The bank was involved in several high level cases with state pension funds as forex execution rates were questioned.
The latest news adds misery to the banking sector with forex rates and the FX fix probes still hanging in the shadows.
The Justice Department, as well as the New York Attorney General, both have lawsuits against the world’s largest custody provider. Last week, the bank stated that it would absorb a $589 million charge as it resolves current issues, including the forex rates complaints, however no cases were specified.
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Major Banks such as BNYM and State Street came under fire in 2009 as leading pension funds in the US filed complaints relating to the amount of foreign exchange fees charged by the banks. The complaints opened up a new wave of discussions in Transaction Cost Analysis (TCA) and a number of measures were taken by the banks to provide confidence that best execution and best pricing practices were being used.
In December 2013, BNYM settled with the state of Massachusetts’ public pension funds for $15.45 million. Bank of New York Mellon has had some luck in previous settlement talks with the Justice Department in 2012, with the bank agreeing to change its disclosures regarding its forex products and services.
Pension funds and investment managers have started adding TCA tools to their reporting of forex rates banks charges. UK-based Merseyside Pension fund used independent sources to review forex rates that it was paying. The local government fund was conscious of benchmarks and used services offered by New Change FX, an independent rates checker; the fund is believed to have reduced charges by 50% as a result of the rates verification.
Banks have been supporting the TCA functionality with leading single and multi-bank platforms coming equipped with tools that provide verification of rates.