Bank of New York Mellon Corp.’s chief executive said most public pension fund managers and the investment firms they hire understand perfectly well how foreign-exchange trading services work, despite allegations that the bank overcharged them and misled them about the costs.
The bank has been engaging in talks with customers, chief executive Gerald Hassell said following a speech before the Boston College Chief Executives’ Club of Boston, ever since foreign-exchange trading allegations first surfaced in 2009. Most of the public pensions, he said, “fully understood exactly how the program worked.”
Bank of New York is defending itself in a number of lawsuits alleging the opposite -- that the financial giant knowingly overcharged clients, including public pensions funds in New York and Massachusetts, on a small slice of foreign exchange related to small stock trades and dividend processing, particularly in countries with less common currencies.
Both BNY Mellon and Boston-based State Street Corp. have denied wrongdoing and said they were principal traders in these foreign exchange transactions, legally making a profit and not bound by the fiduciary role they usually have in other services to these customers. Hassell said it’s the investment managers hired by the pension funds that have that duty.
“The investment managers are the ones who make the decision to use us or not, and they’re actually the ones who bear the fiduciary responsibility to act well on behalf of their clients,’’ Hassell said during a question-and-answer session with reporters. He suggested that they all knew they were paying convenience store prices for this type of foreign exchange.
“They understand the program very, very well,’’ Hassell said.
He declined to say whether settlement talks were progressing between BNY Mellon and prosecutors in New York who have sued the company for $2 billion in alleged foreign exchange overcharging.
Massachusetts Secretary of State William F. Galvin last month filed a civil lawsuit against the bank, alleging that it had defrauded the Massachusetts state pension fund of $29 million over a decade.
Of the Massachusetts case, Hassell said, “We’re basically defending ourselves because, again, we think we provided a valuable service at a fair price.”
Hassell, 59, took over as chief executive of BNY Mellon last August, after the foreign exchange battles had already become public, following complaints filed by Madoff whistleblower Harry Markopolos. Hassell was previously president of the company; he succeeded Robert P. Kelly, who had a falling out with the board over the company’s direction.
Hassell during his speech painted a grim portrait of the global economy and suggested that the government should “hit the pause button” on new financial regulations, while the industry adapts to new rules that have already been passed under Dodd-Frank.
Asked about Rep. Barney Frank’s announced retirement, he said he and Frank often did not see eye-to-eye, but that “he’s been an incredible patriot for our country.”
Hassell said BNY Mellon was cutting costs around the world, particularly in areas related to technology. In the Boston area, where it employs about 4,000 people, the bank is in “very slow growth mode,” he said.
Beth Healy can be reached at firstname.lastname@example.org.