BNY Mellon

The way that collateral is being used, and indeed needed, in financial markets has altered significantly since the financial crises. With the central role handed to CCPs in markets, the majority of trades now need to be collateralised in one way or another.

Despite the promises of better behaviour by banks after their fines for past abuses in the foreign exchange markets, investors should subject their currency transaction procedures to a thorough review to ensure best execution.

The record fine imposed by the UK’s Financial Conduct Authority (FCA) on US bank BNY Mellon’s UK entities - BNY Mellon London branch (BNYMLB) and Bank of New York Mellon International Ltd (BNYMIL) - for breaches of the rules on the safekeeping of client assets signals an aggressive new stance by the UK regulator. The FCA’s findings could prompt reviews of business models and management processes at other custodians. Meanwhile, investors need to take a close look at the robustness of their existing custody arrangements.

Reporting of derivatives has not been aimed at lay trustees but this will change as pension funds look for more in-depth risk analysis.

Lawyers for Edward Pennings have alleged the bank took undisclosed mark-ups for transition management and claim the FX business works on the same basis.