Regulator denounces Allied Irish overcharges

Bank had known for years of excessive exchange fees

December 08, 2004|By BLOOMBERG NEWS

DUBLIN, Ireland - Allied Irish Banks PLC's management and staff were criticized by Ireland's financial regulator yesterday for knowingly overcharging some customers on currency transactions.

"The failures within Allied Irish Banks uncovered by the investigations are completely unacceptable," Liam O'Reilly, who heads the Irish Financial Services Regulatory Authority, said at a news conference in Dublin. "We will not tolerate such practices within the financial services industry."

Two years ago, Allied Irish learned that John Rusnak, a trader at its Baltimore-based Allfirst Financial Inc., had racked up and hidden $691 million in losses over more than five years before the bank noticed discrepancies. Allied Irish sold Allfirst to M&T Bancorp last year.

Allied Irish said in May that an "error" at its foreign-exchange business meant some clients who bought currencies paid twice the fee the bank told the regulator it charged over an eight-year period starting in 1996. There were at least seven opportunities for staff members at the bank to inform the regulator about the overcharging from 1998 until this year, and they failed to do so, the watchdog said.

One of the opportunities arose in 2002, when an internal memorandum drew attention to the cost of dealing with the issue and the need to inform the regulator about the charges, the financial services agency said. O'Reilly declined to identify the managers who saw the memo, noting the risk of prejudicing the company's disciplinary procedures, which have yet to conclude, he said.

Allied Irish "accepts the findings of the IFSRA report and we very much regret the failures it documents," Chief Executive Officer Michael Buckley said in an e-mailed statement. "Some disciplinary action has already been taken, and in other cases it is under consideration or still under way."

Allied Irish can't be punished because legislation empowering the watchdog to take action didn't exist when the violations took place. It will discipline employees who were responsible and report the action taken to the regulator, O'Reilly said.

The company has set aside 50 million euros ($67 million) for compensation payouts and related costs and pulled "up the floorboards" on its charges, Buckley has said.

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