AIB is facing a bill of significantly more than €25 million, with the Irish Financial Services Regulatory Authority forcing the bank to repay overcharged foreign exchange customers and to bear the cost of an independent inquiry, writes Siobhan Creaton, Finance Correspondent
The bank has been ordered to deposit €25 million with the regulator, some €11 million more than the initial €14 million estimate of the amount it had overcharged certain customers on foreign exchange transactions over eight years.
IFSRA's investigators, who have been working in AIB since last Friday, believe that the bank's total take from this overcharging is €20 million, and has estimated that these customers are entitled to be paid another €5 million in interest.
This higher figure is partly because the investigators believe the bank had been overcharging customers in 1994 and 1995, for two years more than AIB had said the error had occurred.
The regulator's chief executive, Mr Liam O'Reilly, said it had a "large degree of assurance" around the €25 million figure but added that it could not guarantee that it would not prove conservative.
In a statement, AIB said it had placed a "good faith" deposit with the Central Bank, adding that its extensive further analysis confirmed that the total amount due to customers should not exceed €25 million. The inspectors have now identified more than two-thirds of the customers affected, who are entitled to about 80 per cent of the total amount overcharged.
When asked to explain whether the bank had volunteered to make this deposit or whether IFSRA had ordered the payment, Mr O'Reilly said the issue was raised during a "very frank exchange" with the bank. This exchange resulted in AIB "volunteering" to make this deposit, he said.
AIB's chairman, Mr Dermot Gleeson, yesterday apologised to customers for its overcharging and said it would seek to address speedily the cases of all customers entitled to reimbursement. He also emphasised that nothing in the information to date suggested that responsibility for what had happened rested with junior staff.
His comments were welcomed by the Irish Bank Officials' Association. Its general secretary, Mr Larry Broderick, welcomed the chairman's comments that the bank would not scapegoat junior staff.
Last night it emerged that a senior AIB official has gone on paid leave while the investigation continues. A bank spokeswoman refused to comment on the matter.
The regulator has also told AIB's board to commission its own independent investigation into how the bank had charged twice the rate of commission it should have for a decade without noticing the error.
Mr Gleeson said this independent investigation would be directed by a person of "undoubted independence" who would provide assurance to the board of AIB and IFSRA of the completeness and independence of the investigation.
"This individual, who will be named within a week, will have access to external independent audit expertise in carrying out the investigation," Mr Gleeson said. The investigation is expected to be completed by mid-June.
The regulator could have fined AIB up to €5 million for this misdemeanour if legislation, which is still before the Houses of the Oireachtas, had been enacted. Mr O'Reilly said that, while he would not prejudge the outcome of this investigation, he expected that this investigation would be "very expensive" for AIB.
"I expect the cost will probably pale in comparison to any fines we would have imposed," he said.
IFSRA would approve the appointment of the independent person nominated by the bank to undertake this inquiry. It would also sanction the team of auditors who would support this individual, who would report to IFSRA.