AIB fraud 'going on for years'

Allied Irish Banks (AIB) says the alleged fraud discovered earlier this month at its US subsidiary had been going on for five years.

"The periods in which the losses arose extend back to 1997," said chief executive Michael Buckley.

I am determined to spare no effort in repairing the damage we have suffered

Michael Buckley
AIB chief

The revelation came as the bank reported its results for 2001 and finalised the losses it incurred as a result of the fraud at $691m (£484m).

This is less than the initial estimate of the losses, which amounted to $750m.

But the company was also hit by the news that it had suffered another loss in the US, although the £7m loss was not the result of fraud, but poor trading.

However, it will raise more questions about the bank's risk management and control mechanism.

'Blow to shareholders'

The bank's management, meanwhile, is still coming to terms with the huge losses at its Allfirst subsidiary.

"The suspected fraud has been a substantial blow to all AIB stakeholders," said Mr Buckley.

"I am determined to spare no effort in repairing the damage we have suffered."

Pre-tax profits during 2001 fell 47% to 612m euros (£374m; $535m).

Austin Hughes, chief economist with rival IIB bank in Dublin, told the BBC's World Business Report that it was a big hit for AIB.

"But at the same time it shows that the bank is still fairly strong in as much as it can absorb it," he said.

Without the $691m loss, the bank would have seen its pre-tax profits rise 10% to 1,4bn euros.

'Rogue trader'

The bank has blamed the alleged fraud at its subsidiary Allfirst on the actions of currency trader John Rusnak.

Mr Rusnak's lawyers have insisted that he did not steal money from the bank.

Allfirst has reported a net loss of $36.8 for 2001, down from its restated net profits of $47.3m.

Following the revelations of the loss, questions were asked about AIB's internal controls and risk management processes.

The FBI and AIB are both currently investigating the circumstances behind the loss.