IRELAND - State Street has been forced to repay Ireland's National Pensions Reserve Fund (NPRF) €2.65m in commissions after it was revealed charges in excess of the agreed transition management costs had been levied.

According to the annual report of the Office of the Comptroller and Auditor General, the overcharge occurred when State Street was disposing of €4.7bn worth of assets between February and May last year and has resulted in the company's suspension from the reserve fund's transition manager panel.

Describing the transition management mandate, the report said it entailed the sale of assets "for a management fee based on the value of the assets disposed".

"No other compensation, other than certain foreign exchange costs, was to be paid to SSBE [State Street Bank Europe]," the report said, noting that the amount payable under the contract would come to €698,000.

The report added that the National Treasury Management Agency, in charge of the reserve fund's assets, became aware of press reports in October 2011 that two senior executives had departed SSBE and requested additional information.

The report added: "SSBE wrote to the NTMA explaining that it had reimbursed a UK client following the application of a commission that had not been expressly agreed with the client, had taken appropriate internal steps to guard against further occurrences of that nature and was conducting a comprehensive review of the small number of other transitions in Europe from earlier in 2011 in which it had agreed to apply a management fee only."

The NTMA learned that its transition mandate was also under investigation, with State Street acknowledging in November that year that commission "for which there was no contractual agreement" had been applied to its mandate.

The repayment of €2.65m was eventually found by an independent review conducted by PwC's Boston office to be €40,000 too high.

However, it had been agreed in advance that the NPRF would not be required to repay any funds should the initial payment be incorrect.

A spokeswoman for State Street declined to comment on the case.

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