A bank beset by scandal in its 44-year history
The need for restructuring, recapitalisation and majority state control at AIB is amply summed up in the figures.
The bank’s market capitalisation has nosedived from nearly €20bn at the end of 2006 to its current level of just €430m; while its share price has gone from nearly €23 to just 30c over the same timeframe.
All the talk of a fourth financial institution coming under Government control (following on from Anglo Irish Bank, Irish Nationwide and the EBS) is stark, but arguably not as shocking as the country’s biggest bank having to go down that road and effectively being kept alive by Government actions over the last couple of years. But, AIB has flirted with controversy and scandal for much of its 44-year history.
AIB famously owned the Insurance Corporation of Ireland (ICI) when it hit the rocks — due mainly to poor underwriting levels — during the nation’s last big period of austerity in the mid-1980s with losses of more than £200m; before being bailed out by the Irish taxpayer to the tune of £400m; after AIB said its entire banking business would be jeopardised if it resolved the crisis itself.
In 2002, the bank found itself at the heart of Ireland’s biggest banking scandal and the world’s fourth biggest when ‘rogue trader’, John Rusnack brought about losses of nearly $700m (€533m) at AIB’s Allfirst US subsidiary.
Two years previously AIB reached a €90m settlement with the Revenue Commissioners — the highest ever tax settlement — over DIRT evasion; with then group chief executive Gerry Scanlon telling a Dáil Committee, investigating the case, that he was unaware of the scale of the problem.
Revenue also imposed a tax settlement on four of the bank’s former directors — including Roy Douglas and the aforementioned Mr Scanlon — over investments made in the Virgin Islands-based investment company, Faldor, which benefited from artificial deals connected with AIB Investment Managers.
Six years ago AIB incurred an overcharging bill, relating to foreign exchange charges, of around €65m. The bank was found to be overcharging on a host of other areas from student accounts to mortgages.
The bank also came out of the Moriarty Tribunal poorly, in 2006, when it was reported that it showed “an extraordinary degree of deference” to Charles Haughey, despite his financial excesses. Add to that the recent controversy over the planned €40m bonuses to senior staff members and Finance minister, Brian Lenihan’s vision of a strengthened AIB becoming an “indestructible part of the Irish banking landscape” once again, has never seemed so distant.
