What's going on?

Wells Fargo, one of America�s biggest lenders, was rocked by yet another scandal as the Wall Street Journal reported late Monday that it had systematically inflated clients� foreign exchange (FX) fees.

What does this mean?

Wells Fargo promised some of the employees in its FX department a cash bonus based directly on the revenue they generated. That apparently provided an incentive for them to decide to overcharge some of their corporate clients, i.e. they told them that an FX trade in, say, an international transaction cost more than it did (victims reportedly included mid-sized businesses and at least one charity). Eventually, some of the more sophisticated clients smelt a rat, and a subsequent investigation uncovered the inflated fees. Senior executives in the FX department got the chop last month at the same time that initial reports of wrongdoing first emerged.

Why should I care?

The bigger picture: Reputational damage can be overcome � but Wells Fargo is putting that mantra to the test�

Wells Fargo�s stock price took a big hit last year when it emerged that its salespeople had systematically opened client accounts (e.g. savings accounts) without permission. The worry for its investors was that the reputational damage would lead to less client business � which appears to have been the case. Another damaging scandal at Wells Fargo threatens to further dent its revenue in the near term, at the very least.


For you personally: FX fees are often major hidden costs.

Most would agree that there�s nothing wrong with a bank or other provider making money from a foreign currency transaction. But the difference in fees varies greatly between providers. For example, exchanging money at the airport is often one of the worst ways to do your FX! But moving money across borders via traditional providers can also be pricey. For large transactions, it makes sense to shop around, looking at both the explicit fees charged and the difference between the market FX rate and the one that the bank gives you.