AIB to pay up for exchange flaws

Allied Irish Bank (AIB) has confirmed it will repay foreign exchange customers it accidentally overcharged during an eight year period.

AIB has set aside 35m euros (£23m; $43m ) to reimburse them, more than double the original estimate of 14m euros.

The bank has been facing a number of problems since it emerged in May that it had levied a higher transaction margin than was agreed with regulators.

AIB said it would ensure that similar mistakes did not happen in the future.

An independent external adviser has been appointed to help the bank, one of Ireland’s two biggest companies by market value, tighten its procedures.

Company chairman Dermot Gleeson said the bank was sorry for the “regrettable lapses” and added that the lender was determined “to put things right between our customers and ourselves”.

But the company’s problems extend further than its foreign exchange business.

In its most recent admission in June, the lender said 10 former and current executives may have been guilty of tax irregularities.

That comes after it emerged that AIB had been deducting unrequested insurance cover from mortgage customers and that it also may have been overcharging trust fund beneficiaries due to an error dating back to 1971.

The most notable case, however, came to light in early 2002 when it emerged that a foreign exchange trader at AIB’s US subsidiary, Allfirst Financial, had concealed losses totalling nearly $700m.

Ireland’s financial watchdog said it would carry on investigating the blunders that led to AIB overcharging its customers and it vowed to find out why they went unchecked for so long.

“The way forward is to complete this investigation so that we can fully rebuild confidence in AIB and throughout the banking sector,” said Liam O’Reilly, chief executive of the Irish Financial Services Regulatory Authority.