Royal Bank of Canada is refunding money to nearly 60,000 personal banking clients after finding an error in the way it calculated some foreign exchange transactions for more than a decade.
The bank said it discovered the error in an internal review of retail banking transactions. From Aug. 1, 2009, until Feb. 8, 2020, the foreign exchange conversion rates used to calculate some foreign currency transactions were incorrect, which had the effect of overcharging clients.
RBC has corrected the error, spokesperson Edith Galinaitis said, and the bank has contacted customers who were affected, providing “a full credit with interest, and impacted clients have now been made whole.” Ms. Galinaitis declined to provide the total amount refunded to clients, but it is not believed to be financially material to the bank.
Early last week, RBC mailed letters to clients about what it described as a “system error” and promised to refund the difference in rates, plus interest of 1.5 per cent a year. The letters said refunds would be deposited in clients’ accounts after July 10. Copies of two letters reviewed by The Globe and Mail promised refunds of a few hundred dollars or less, depending on each client’s past transactions.
Ms. Galinaitis said the error “was not deemed to be a regulatory issue” and that the bank did not notify the relevant regulator, the Financial Consumer Agency of Canada, which is in charge of ensuring that federally regulated banks comply with consumer protection measures.
FCAC spokesperson Lynne Santerre said banks are required to disclose conversion rates for foreign currency to customers and how those rates are determined and applied. When a bank does not comply, “FCAC may conduct an investigation and respond with the appropriate measure to ensure compliance,” she said.
Last year, RBC and Toronto-Dominion Bank paid nearly $23-million in penalties as part of settlements with the Ontario Securities Commission, a provincial regulator, over compliance failures in the banks’ foreign exchange trading businesses. In hundreds of instances from 2011 to 2013, traders at the two banks disclosed confidential transaction details, allowing them to gain a potentially unfair advantage in the market.
But those traders worked in the banks’ capital markets arms, which are separate from the retail banking operations that handle most foreign exchange transactions for personal banking clients.
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