Banks must be punished for violations
The bank was merely making restitution. None of the money represents a fine or penalty imposed on the bank for depriving so many people of so much money, simply because no provision for such sanctions exist in current relevant financial legislation.
The deposit was prompted by a "frank discussion" with the Irish Financial Services Regulatory Authority (IFSRA), rather than by any pricking of the bank's putative corporate conscience.
The measure of reparation may not necessarily be satisfied by the E25m, as the extent of money appropriated from customers can only be determined by the various investigations which will be conducted into this extraordinary episode.
Senior inspectors from IFSRA have begun their investigation at the bank's headquarters which will entail a painstaking scrutiny of AIB's procedures.
Determining how the bank, with its state-of-the-art technology, managed or mismanaged to perpetrate such a gross miscalculation, may not take too long. Significant progress has already been made in identifying affected customers, according to IFSRA's chief executive Liam O'Reilly, while the investigation generally is making good progress.
Given that they have to untangle an incredible mess that occurred over an eight-year period a feat which AIB initially intimated was an impossible task the performance of the regulatory authority so far has been impressive considering the powers it has, which seriously need to be expanded.
Within less than a week, from being presented by the bank as almost a victimless aberration, at least two-thirds of the victims will be identified; the money owed to them has practically doubled, and now it appears some senior bank officials may be held responsible, instead of the junior staff who were originally being sacrificed.
The AIB will also set up its own investigation, directed by a person of "undoubted independence" but that conducted by the regulatory authority will have to be the primary one.
In tandem with the investigation into AIB, IFSRA has also written to other financial institution requesting it to verify that the charges it applies to customers are within the maximum levels notified to the regulator.
The AIB debacle has shown up one perturbing fact. Trusting the advice from a financial institution can be a bitterly expensive experience for the uninitiated in the mystifying world of investments.
In the past couple of days, frightening stories have emerged of customers, especially elderly people, who have lost countless thousands from their life's savings because of advice given by banks.
In a case highlighted by the Irish Examiner a 91-year old lady lost E63,000 on her account. The response from Bank of Ireland was that the policy was "in line" with what the customer wanted.
Similarly, several thousand investors, mostly ordinary people who had put in lump sums like redundancy payments, lost their money in the collapse of Morroghs stockbrokers almost three years ago.
Most of the E16 million belonging to them has not been recovered, and it is only now that the Minister for Finance is setting up two working groups to find out what happened.
The lessons to be learned leave no doubt but that greater teeth must be given to the IFSRA to police the financial sector, and provided for in legislation, and that the institutions be made bear the burden of their own violation of regulations.
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