(January 19, 2012) — BNY Mellon has agreed to a partial settlement with the Justice Department to change aspects of its disclosure policy relating to its foreign exchange services.
The bank agreed to disclose additional information on transaction pricing, Bloomberg BusinessWeek initially reported.
Both BNY Mellon and State Street reported earnings on Wednesday. While State Street revealed improved profits, shares declined as the bank failed to match Wall Street analyst expectations. At the same time, BNY Mellon revealed a fall in net income and lower foreign exchange volume.
“Foreign exchange and other trading revenue totaled $228 million compared with $258 million in the fourth quarter of 2010 and $200 million in the third quarter of 2011,” BNY Mellon reported in a statement. “In the fourth quarter of 2011, foreign exchange revenue totaled $183 million, a decrease of 11% year-over-year and 17% sequentially. Both decreases resulted from lower volumes. The year-over-year decrease was partially offset by higher volatility, while sequentially, volatility decreased.”
The case against BNY Mellon is just one example of heightened scrutiny into custodial banks, as states and federal authorities increasingly allege that such banks cheated pension funds and private clients.
Read “Your Largest Unmanaged Exposure” in aiCIO‘s Summer Issue, in which Cynthia Steer, previously at Russell Investments and now Head of Manager Research & Investment Solutions at BNY Mellon, speaks on how she considers currency exposure the number one issue that plan sponsors have to deal with.