The chairman of AIB has said he feels the financial services regulator was "a bit severe" with the bank in relation to the foreign exchange charges controversy.

In the past three to four months, the Irish Financial Services Regulatory Authority (IFSRA) has brought about a situation that has cost the bank €50 million, Mr Dermot Gleeson told the Oireachtas Joint Committee on Finance and the Public Service. "That is a serious amount of money."

He asked what a fair fine would be for a case where the bank had failed to notify the regulator properly but where customers had not suffered.

The bank had charged the market rate for foreign exchange services but given the wrong rate in its notification to the regulator. If the bank had notified the regulator properly, it was unlikely that there would have been any change in the rate.

If the bank had been fined €1 million a year for the eight years it took before the mistake was noticed, that would have come to €8 million, he said in response to Ms Joan Burton TD, finance spokeswoman for the Labour Party. Ms Burton had raised the issue of the relationship between the regulator and the bank.

Mr Gleeson said the bank's response to the foreign exchange issue would cost it €50 million, made up of refunds and related costs. "If €50 million is cosy, then I would hate to see them turn nasty," he said, referring to IFSRA.

He agreed with the chairman of the committee, Fianna Fáil's Mr Sean Fleming TD, that he felt IFSRA had been "a bit severe". Mr Fleming said he was pleased to hear this as it indicated there was no cosy relationship between AIB and IFSRA.

The chief executive of AIB group, Mr Michael Buckley, said it was a good thing IFSRA was a tough regulator.

Mr Gleeson said he did not agree that the bank had been involved in overcharging in respect of its foreign exchange charges. Customers were now, in effect, "getting the last eight years of foreign exchange at half price".

The failure to notify correct charges had first come to the bank's attention in September 2002 "and our failure to resolve the issue then is a matter of serious concern". A sub-committee of the board was established to determine if disciplinary action should be recommended.

"The committee will shortly make these determinations and will communicate to the individuals concerned. Those individuals are entitled to fair procedures."

The bank commissioned Dr Peter Scott-Morgan, "a world expert on corporate culture", to examine the culture in AIB. He found that "AIB has a sound culture. It is not fundamentally flawed but some work needs to be done to ensure that our culture is fully in line with best standards".

Mr Gleeson said it would be a shame if a good Irish company had to apologise for making a profit. The best companies in the world were those that delivered good value and made a profit. He mentioned Dell and Southwest Airlines as two examples.

Mr Richard Bruton TD, finance spokesman for Fine Gael, said there had been a "long string of failures" at AIB and it seemed the internal audit committee was not picking them up.

Mr Buckley said the internal audit committee turned up lots of issues that are dealt with. While the bank hoped to pick up 100 per cent of what was going on, that did not occur in any company.

Mr Caoimhghín Ó Caoláin TD, for Sinn Féin, asked where the buck stopped when problems were discovered within the bank. Problems at the bank would not be rooted out with a "Macbeth-like washing of hands at the highest level".

Mr Gleeson, responding to Mr Michael Finneran of Fianna Fáil, said AIB had not broken the law when imposing the foreign exchange charges.

The law did not make the price notified to the regulator an enforceable price. The price charged was "the one that was on the wall".