AIB to escape punishment under rules

TOUGH new measures going though the Dáil cannot be used to punish AIB for overcharging its customers €20 million on their foreign exchange transactions.

While the proposed changes are a direct response to the AIB scandal, they cannot be used to sanction the bank whose eight-year overcharging was outed by a whistle-blower last week.

Under the new rules, it will be an offence to charge more for bank services than the amounts advised to the Irish Financial Services Regulatory Authority (IFSRA).

A spokeswoman for the Department of Finance confirmed there would be no retrospection in this case.

Fine Gael spokesman on finance Richard Bruton demanded more time to discuss the change in the law proposed under Central Bank and Financial Services Authority of Ireland Bill.

Under the changes, IFSRA can impose fines on banks of up to €5m for charging above the rate notified to the regulator.

IFSRA will also have the power to disqualify directors or managers from further involvement in a financial institution and impose a maximum fine of €100,000. The country's biggest bank was forced to set aside €25 million last week to cover the full cost of the overcharging scandal that ran for at least eight years.

The chief executive of IFSRA, Liam O'Reilly, and his director of Consumer Affairs, Mary O'Dea, will testify before the Joint Oireachtas Committee on Finance and Public Services today as the country endeavours to find answers to how this scandal ran for so long without being detected. Later, the governor of the Central Bank, John Hurley, and AIB management will also be called before the committee in the weeks ahead.

The Irish Bank Officials Association has expressed concerns also about the bank's handling of the scandal.

General secretary Larry Broderick has called for an urgent meeting with the Minister for Finance, Charlie McCreevy, in light of the scandal. IBOA is concerned that lower down the line, ordinary bank workers will take the punishment for this latest AIB scandal.

IBOA has been inundated with calls from worried staff and customers since the scandal broke, he said.

It is imperative that confidence in our banking system is restored as soon as possible and "this can only be achieved by a quick, open and totally transparent investigation into what has occurred and why".

IBOA welcomed the Government's decision to amend the Central Bank and Financial Services Authority of Ireland Bill.

It was critical, however, that substantial fines or penalties must be targeted at the corporate institution guilty of overcharging and not junior staff carrying out their duties, the IBOA said.

Those who profited from overcharging customers are not ordinary staff.

"Under no circumstances should they be the people scapegoated from this process," said Mr Broderick.