ACC Bank has been questioned by the Minister for Finance, Mr McCreevy, about a series of deficiencies identified in a £200,000 consultants report drafted by KPMG.

The bank has already responded to the minister and a spokesman said a more comprehensive report is to be sent to Mr McCreevy by Wednesday. A full public statement from the bank is also likely.

ACC Bank is currently in merger talks with TSB Bank and the report was commissioned by ACC Bank in order to identify what a due diligence examination might report should the merger talks result in such an exercise being carried out.

The report was sent to Mr McCreevy by the bank's chairwoman, Ms Gary Joyce, who commissioned the study. According to the spokesman "many of the matters raised in the report were being addressed by management prior to that examination".

"The bank's management were working on a comprehensive response to the issues raised with a deadline of October 28th."

The report is understood to have found that the bank had strong profitable growth, low bad debts and reliable accounting systems. However it also identified a number of weaknesses.

These included: weak compliance on regulatory matters which had been identified but not attended to; poor relations and communication between the board and senior management; disciplinary problems and poor procedures, including the absence of action in relation to poor managers; branches with operational control deficiencies; a policy of allowing treasury to trade on its own account, leaving it exposed to potentially unscrupulous dealers; and substantial disimprovements in arrears on current accounts since early 1997.

The prospects of a merger between ACC Bank and TSB Bank were given a major boost earlier this month when the ACC board decided in favour of merger talks rather than trying to find an overseas partner to invest in the State-owned bank.