What exchange rate did your bank actually apply?

Most answers to this question amount to one piece of advice: « compare the rate you got with the market rate ». That is accurate and close to unusable as it stands, because the difficulty is not the principle — it is finding which market rate to compare with, at which moment, and from which document.

Here is the full method, applicable to your statements from the last three months.

Step 1 — Find the amount on both sides

Every FX transaction has two amounts: what left one account and what arrived in the other, or what was debited in euros for a payment in a currency. The rate applied is simply the ratio of the two.

Step 2 — Strip out fixed fees before calculating

An important point of method: if fixed fees were charged on the same transaction — transfer fees, an FX commission billed separately — they must be removed before computing the rate, otherwise you mix two different things and overstate the margin on the rate.

Fixed fees are negotiated on a tariff schedule; the margin on the rate is negotiated differently. Adding them together to compare total cost is legitimate, but that comes afterwards, once each component has been isolated.

Step 3 — Get the market rate at the right moment

This is the step where most checks go wrong. The reference rate is the pair's mid rate — between the market's bid and offer — at the time of execution, not at the value date nor the closing rate of the day.

• The deal confirmation usually shows a date and, depending on the institution, a time of execution. That is the reference.
• Failing a time, use the day's high and low: you will get a range for the margin rather than a single figure, which is enough to decide whether the gap is significant.
• Never compare with the daily reference rate published by the ECB in the early afternoon: that is a statistical observation, not a rate at which a transaction executes.

Step 4 — Compute the gap

The gap is expressed as a percentage: (rate applied − mid rate) ÷ mid rate, in absolute terms. That is the only form comparable from one transaction to another, whatever the amount and the currency.

Step 5 — Weight, and look at the right number

A simple average margin means nothing if your transactions run from EUR 5,000 to EUR 500,000. The average that counts is weighted by the amounts: that is what tells you what FX really costs you over the period.

The second number to look at is the dispersion. A stable margin is a pricing condition: it can be renegotiated. A margin that varies widely from one transaction to the next signals something else — different treatment depending on the channel used, the person you dealt with, or the time of day. That information is often worth more than the average itself.

And then what

The record is only worth having if it is used. Three uses, in order of effectiveness:

1. Open the discussion with your bank on the basis of numbers, not an impression. It is the most negotiable line in the relationship, because it is discretionary.
2. Ask a competing institution for a quote on a typical flow, to have an external benchmark.
3. Check before signing rather than after: checking afterwards documents, but only checking beforehand still allows the quote to be renegotiated.