“It’s the equivalent of walking into a used-car dealership and paying €50,000 for a car that others can buy for €5,000”
The above is a comment from the lead author of a study for the European Central Bank, which accuses banks of overcharging SME customers for Forex services. Even though this is new research for the ECB this is something we have known for a long time. I’d even go one step further and say this extends far beyond small corporates and also affects private individuals sending money overseas. The FT’s report is online and a few main points are below.
• Study analysed half a million forward contracts across 200 banks and 10,087 clients
• Banks across Europe collect an extra €638m a year, on average, as a result of discriminatory pricing in euro/dollar forward contracts
• In some extremes customers paid 25 times more for their FX service than more “sophisticated” customers
• Rates determined by banks perception of clients expertise in FX markets
• 10 largest dealers (banks) share 65% of the market
• Report suggests banks are resisting efforts for the market to become more transparent
Are you one of the 65%? Would you like to discuss alternative, potentially more cost effective solutions?