BOSTON Dec 8 A payment processing glitch at BNY
Mellon Corp this week should not be a surprise as
executives inside the world's largest custody bank recently
highlighted a number of problems with the daily task of moving
trillions of dollars around the global banking system.
BNY Mellon on Thursday declined to say how widespread the
problem was. Officials at the Federal Reserve were not available
The bank provides payment services in more than 100
currencies through more than 2,000 correspondent bank accounts
worldwide. Known as a trust bank, BNY Mellon safeguards and
keeps track of nearly $26 trillion in assets for clients that
include the largest asset managers, pension plans and
corporations around the globe.
The breakdown is the second major technology glitch to
happen at BNY Mellon in the past 18 months.
In August 2015, the mutual fund accounting system the bank
relies on broke down and delayed how billions of dollars in
assets were valued. The bank in March agreed to pay $3 million
to settle an investigation by Massachusetts' top securities
regulator related to BNY Mellon's problems calculating net asset
values on some 1,200 mutual funds.
On Sunday afternoon, BNY Mellon began having problems
processing clients' payment instructions, the bank confirmed on
Thursday in a statement. BNY Mellon blamed the problems on its
connection to SWIFT, a global financial messaging system that
banks use for money transfer instructions.
BNY Mellon processes about 160,000 global payments each day
totaling an average of $1.6 trillion, according to its financial
"We became aware of an issue that impacted our ability to
send messaging to and from the SWIFT network on Sunday
afternoon, which we resolved by Monday morning," the bank said
in a statement.
BNY Mellon said on Thursday its system is fully functional
and additional backup has been established to reduce the risk of
future disruptions. The bank declined to comment on what caused
the problems in the first place.
Nancy Atkinson, senior analyst for Aite Group, said the
outage at BNY Mellon would be considered a serious problem at
any large financial services company. But investors seem to have
shrugged off the problem as BNY Mellon shares have risen 2
percent this week.
In a recent research paper, BNY Mellon executives noted how
it has been more than 40 years since there has been a
significant improvement in how U.S. domestic payments are
processed. Earlier this year, SWIFT, which is known for handling
international payments, was used by hackers to transfer $81
million from Bangladesh's central bank to a bank in Manila.
SWIFT officials were not available to comment about BNY's
"While generally reliable, the process long used to move
funds globally is fraught with familiar challenges related to
timing, cost and transparency," BNY Mellon executives Tony Brady
and Chris Mager wrote recently in a paper on modernizing global
The executives said cross-border payments may occur in the
same day but can take up to four days to complete. And there's
also a transparency problem for clients, they said.
"Generally, banks in the network cannot provide clients with
real-time and precise information about payment status,
including updates on when funds reach beneficiaries and the
exact costs involved in end-to-end execution," according to the
BNY Mellon research paper.
For its part, BNY Mellon's senior executives have told
analysts and investors on conference calls that it has been
taking the lead to spark innovation in the global payments
The bank, for example, is participating in SWIFT's global
payments innovation initiative to improve how money is moved
across borders. The initiative is expected to go live early next
(Reporting By Tim McLaughlin; Editing by Phil Berlowitz)