Ohio to end ties with 2 banks in currency dispute

ANN SANNER Associated Press Published:

COLUMBUS, Ohio (AP) -- Ohio's treasurer is expected to announce Monday that the state will drop its business with two banks over concerns the institutions may have manipulated foreign exchange rates charged to four of the state's pension funds, potentially costing beneficiaries millions of dollars.

State Street Corp. and Bank of New York Mellon Corp. provide foreign investment services to their client pension funds. Combined, the banks hold roughly $41 billion of the pensions' international asset.

Ohio Treasurer Josh Mandel will select new banks to handle the funds on Monday, his spokesman said.

The custodial banks typically handle foreign currency transactions on international investments on behalf of their client pension funds.

In June, Mandel asked the state's attorney general to investigate whether the banks engaged in improper currency-trading practices "to maximize the banks' profits, at the expense of Ohio public servants, businesses and taxpayers."

Attorney General Mike DeWine last week filed a lawsuit against BNY Mellon, alleging fraud, deceptive trade practices and other misdeeds in the handling of the state's retirement funds for police officers, firefighters and school employees.

State investigators say the funds were overcharged when the bank improperly used exchange rates most favorable to the bank to convert U.S. funds into foreign currency for stock purchases.

The School Employees Retirement System of Ohio and the Ohio Police & Fire Pension Fund are seeking damages in excess of $16 million for losses the state alleges were incurred by the funds as a result of BNY Mellon's practices.

Kevin Heine, a spokesman for BNY Mellon, said Monday the company was disappointed by the treasurer's action because "we believe we have provided the state with valuable services at competitive prices."

Heine said the state's lawsuit "recycles baseless allegations."

"We are confident we are right on the facts and the law," he said.

The attorney general's office is continuing to review State Street's foreign currency practices, a DeWine spokeswoman said.

A message seeking comment was left at State Street.