The Single Supervisory Mechanism in Frankfurt is set to investigate allegations made by a whistleblower this week in relation to AIB and the way it reported progress on problem loans in recent years.
This follows a complaint made by the whistleblower to the Central Bank of Ireland via a confidential email account for protected disclosures operated by the regulator.
The claims have been made by a whistleblower who worked within a division of the bank that handles bad loans, called the Financial Solutions Group (FSG).
The individual suggested AIB has overstated progress on dealing with the loans in order to suggest greater progress had been made in terms of restructuring the debts.
According to RTÉ, the whistleblower said restructures were "clustered at the end of each month and the end of each quarter, indicating the bank was under pressure to hit targets in advance of real progress".
FSG group
FSG was led by Brendan O’Connor from February 2013 to October 2015 and is currently headed by Jim O’Keeffe. Mr O’Connor is now head of AIB’s British operation.
At peak, the FSG group would have employed more than 2,000 staff and managed a portfolio of loans valued at close to €25 billion.
It now has about 1,000 staff, managing problem loans of €13 billion along with some performing loans.
As AIB is considered an institution of systemic importance in Ireland, the investigation will be led by the Single Supervisory Mechanism (SSM), a unit of the European Central Bank set up in 2014 to take direct charge of financial supervision in the euro zone.
Neither the SSM nor the Central Bank of Ireland would comment on the allegations yesterday. The regulator in Dublin said “any correspondence received by the Central Bank through its protected disclosure channel is treated seriously and examined thoroughly”.
AIB said it had not been “made aware” of the allegations by the regulators and had no information about the identity of the person who has made the claims.
It is understood AIB informed the Department of Finance about the allegations on Thursday.
The department manages the State's 99.9 per cent shareholding in the bank. AIB chief executive Bernard Byrne spent most of this week in north America meeting institutional investors as part of a non-deal roadshow for its proposed IPO of shares later this year.
He arrived back in Ireland as news of the allegations began to emerge.
It is not clear if the whistleblower currently works for AIB or if they recently left the bank. Under statutory protections, a disclosure made in good faith results in the person making the allegation being protected from civil liability.
The disclosure
In addition, the employer may not penalise them for making the disclosure and could be prosecuted for doing so.
The ECB has a duty to ensure effective mechanisms for the reporting of breaches of relevant EU law. Last year 79 breach reports were received, 51 of which were within the remit of its supervisory tasks. These reports mainly concerned governance issues and the calculation of own funds and capital requirements.
Between November 4th, 2014, when the ECB and SSM assumed direct supervision powers for euro zone banks, and the beginning of 2015, 11 breach reports were received. Three were considered relevant for the ECB’s supervisory tasks.
The ECB can impose penalties on credit institutions of up to twice the amount of the profits gained or losses avoided because of a breach where those can be determined, or up to 10 per cent of the total annual turnover in the preceding business year.
