AIB is unlikely to face prosecution or any other sanction for overcharging foreign exchange customers by €14 million.

The bank was in breach of section 149 of the Consumer Credit Act, 1995, by charging 1 per cent on every non-cash foreign exchange transaction worth over €635 (£500), between 1996 and last month, when it should have charged 0.5 per cent. It admitted the blunder last night.

However, a spokesman for the Irish Financial Services Regulation Authority (IFSRA) said last night that the law did not give it the power to take any action against institutions that were found to be in breach of that Act.

"The Act does not give us the power to impose a particular sanction for any breach of that particular section," he said.

Under section 149, financial institutions have to notify any intended increase in charges to IFSRA in order to get its approval. It can refuse approval or recommend a lower increase.

While the law allows IFSRA to get a High Court order against institutions in some circumstances, it makes no provision for prosecuting, fining or taking any other form of legal action against banks that have broken the law.

IFSRA's spokesman last night pointed out that it was obliged to operate under the legislation. The authority can investigate financial institutions, but it is waiting for the Oireachtas to pass a bill giving it powers to prosecute and sanction them for a wide range of offences.

The section 149 power was originally granted to the Director of Consumer Affairs, who had responsibility for the area up to a year ago. AIB notified the charge in question to that office in 1996.

The current director, Ms Carmel Foley, told The Irish Times last night that her office would carry out its own investigation into the affair.

According to a spokeswoman, when the bank notified the office, it inadvertently put 0.5 per cent on its notification instead of the 1 per cent it intended charging. It levied the 1 per cent until last month, when it discovered the error.

AIB's competitor rivals were last night reviewing their own systems following the revelation that the Republic's largest bank had overcharged customers for foreign exchange. Bank of Ireland said it had reviewed its systems and was satisfied that it was not affected by similar problems.

Permanent TSB said it had safeguards to ensure overcharging did not occur. A spokesman was reluctant to comment further until the full circumstances of the AIB affair emerged.

National Irish Bank said it would have to consult its technical staff before being able to state with certainty that its computer systems were fool proof. "If we do discover evidence of overcharging, then we will ensure customers were in the position they were before," a spokeswoman said.

Ulster Bank said there was no reason to believe its systems were not functioning properly.