Bank of New York Mellon Corp is in talks with federal prosecutors to resolve a civil lawsuit accusing the bank of overcharging clients in trading currencies, the Wall Street Journal said, citing people familiar with the matter.

A possible deal would involve BNY Mellon agreeing to pay a penalty and to undertake remedial steps, including improved disclosures to currency-trading clients, the Journal said.

The bank would not admit to wrongdoing under any agreement, the people told the paper.

Bank of New York Mellon was sued by two U.S. states in August over allegations that the company overcharged pension funds on foreign exchange transactions.

The moves by Florida and Virginia escalated a legal battle over claims that custodial banks routinely overcharged their clients. California sued State Street Corp in 2009 over similar allegations.

The bank has strongly denied the allegations in suits related to its currency trading service and has said it will defend itself.

Representatives for the Manhattan U.S. Attorney and BNY Mellon declined to comment on the talks to the Journal. They also could not be reached for comment by Reuters outside regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore' Editing by Matt Driskill)

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