Bank covered up its failures

AIB COVERED up its customer charges failures even though it had seven opportunities to come clean, financial watchdog IFSRA said yesterday.

The regulator’s long-awaited report into the bank’s foreign exchange and other charging structures found certain unnamed bank staff knew the bank had failed to comply with its legal requirements. It also suggested the bank may have attempted to bring its charging structure into line in the hope that the breach would never be detected.

IFSRA chief executive Liam O’Reilly said AIB’s failures were unacceptable and that the regulator would not tolerate the practices it uncovered.

“Overall, the conclusion of the Financial Services Regulator is that in certain parts of AIB, there were ineffective standards of governance and a culture that led to unacceptable behaviour and practices in the last 1980s and 1990s,” the report said.

The bank was said to have spurned chances to tell the regulator about its charging issues when prompted to do so during routine requests between 1998 and 2004 to confirm that its charges were in order.

AIB will pay out a total of €34.2 million to compensate customers who were charged more than the levels for which AIB had permission from the regulator. €8.1m related to transactions where the bank had charged more than the rate agreed with customers.

IFSRA said AIB could not benefit financially from its failures and would not be allowed to keep money from cases where customers could not be traced. The bank will report the outcome of all disciplinary action taken against employees involved in the cover-up. IFSRA named none of the individuals in question, citing legal reasons and a desire not to compromise the ongoing disciplinary process.

AIB said it accepted the report and apologised to the regulator, its customers and shareholders. The bank has already repaid €16m and will entertain requests for refunds indefinitely.

The bank will also beef up its internal procedures to improve compliance and controls. A new director of operations will be appointed at senior executive level in the near future to implement a new strategy to handle the group’s day-to-day processes. A new internal policy will make clear to staff that they must report issues to superiors.