The Ohio treasurer's office intends to fire Bank of New York Mellon Corp. and State Street Corp. as the custodians of state-run pension funds because it suspects the banks have been overcharging two of the funds on foreign-currency transactions.
The Cleveland Plain-Dealer reported Monday that State Treasurer Josh Mandel will announce later today that the state will no longer do business with the banks and that his office will choose new banks to manage roughly $41 billion of international assets in four of the state's five pension funds.
Mandel's decision comes on the heels of a lawsuit the state filed against BNY Mellon last week in which it claims that the custody bank overcharged two of the pension funds, the Ohio Police and Fire Pension Fund and the School Employees Retirement System of Ohio, on foreign currency transactions. The state is seeking damages of $16 million.
"Our complaint alleges that BNY-Mellon violated the terms of their custodial agreements with the Ohio funds, and exploited the volatility of the foreign currency market to their advantage at the expense of Ohio pensioners and their families," Ohio Attorney General Mike DeWine said in a statement announcing the lawsuit last week.
The suit is one of several BNY Mellon is facing from state attorneys general in connection with its foreign-currency transactions. In October, the bank denied
DeWine also said last week that his office is reviewing State Street's foreign-currency transaction practices at Mandel's request.
Mandel is a Republican who is currently campaigning for the U.S. Senate seat now held by Sherrod Brown, a Democrat. His office has not said which banks would replace BNY Mellon and State Street, but the Plain-Dealer reported that JPMorgan Chase & Co. and Citigroup Inc. are both in the running.
