AIB scandal - Root and branch bank reforms vital

BEATING its breast in a belated act of contrition, AIB is forking out almost €35 million by way of restitution to thousands of customers - not because it broke the law, which it now accepts, but because it is crucial to restore trust in the bank.

Caught red-handed in Ireland's worst overcharging controversy, the country's largest banking group had no choice but to put up its hands and admit it had "messed up", to quote AIB chairman Dermot Gleeson.

People will be reassured by this frank admission that the company was in breach of the law by not informing the Irish Financial Services Regulatory Authority (IFSRA) about the problems of overcharging on its foreign exchange.

They will also be reassured by the move to refund customers despite AIB's claim that, technically speaking, it was not obliged to pay up as the overcharged clients had no recourse under the law.

But with executive heads under the guillotine, there is a keen awareness that refusal to refund customers would turn an unmitigated PR debacle into an outright disaster.

The first of three inquiries into a series of overcharging and tax scandals at the bank, the long-awaited report spells out how much was overcharged, how many customers were hit and how the bank is refunding the money.

AIB's response is already paying dividends as investors saw the value of its shares jump initially by 20c on the Irish Stock Exchange, the key barometer of investor confidence.

Serious misgivings remain, however, since the practice of overcharging was still going on two years after the bank's "mistake" first came to light.

Consumers also find disturbing the fact that were it not for the whistleblower, the lid would still be tightly clamped on the AIB can of worms.

Moreover, the mole's marked reluctance to raise the issue at executive level speaks volumes of a lack of confidence in management's likely response. The question confronting AIB management is why someone so deeply concerned about the practice of overcharging did not feel safe in reporting the issue. This despite the company's much vaunted whistleblower's charter.

It would be hard to exaggerate the gravity of the situation. Some 66,000 AIB customers owe the whistleblower a large debt of gratitude.

Hopefully, rank-and-file personnel will in future find the door to management open and whistleblowers can feel their jobs are safe.

Lacking this assurance, the informant alerted the Irish Financial Service Regulatory Authority about the company's overcharging practices. But perceiving a lack of progress by the financial watchdog, the story was then leaked to RTÉ investigative reporter Charlie Bird and the revelations came thick and fast as the bank's mess was exposed.

The jury is still out pending the outcome of further probes to discover whether or not overcharging was the result of genuine mistakes at the bank. What went wrong, who was culpable, how it went undetected for almost 10 years and what action will be taken are all key questions yet to be answered.

Thanks to Mr Gleeson's unswerving determination to get to the bottom of the overcharging scandal, the bank has owned up to breaking the law by failing to honour a serious regulatory requirement.

There is a heavy onus on AIB to initiate root and branch reforms and ensure the bond of confidence between the bank and its 1,500,000 customers is fully restored.