Leaders of Ireland's largest bank testify about 'awful and embarrassing' charging scandals

Associated Press Newswires 19.10.2004

The chief executive of Allied Irish Banks PLC, Ireland's largest and most scandal-prone bank, said Tuesday it was "awful and embarrassing" that the company failed to detect chronic overcharging of customers over many years.

Chief Executive Michael Buckley and Chairman Dermot Gleeson testified before a committee of lawmakers about the bank's efforts to get to the bottom of its charging mistakes, the bulk of which were admitted in May. Both leaders initially refused to testify publicly to lawmakers, citing ongoing bank and external probes into the matter, but relented.

Gleeson told the parliament's Finance and Public Services Committee that bank investigators had identified 1.1 million instances of charging illegal amounts to 173,000 customers from 1996 to early 2004.

Buckley said he was sorry - not for any personal mistake, but for the fact that lower-level bank officials had failed to inform the top brass, such as himself, about the overcharging problem for so long. He insisted all the errors were accidental.

"It's awful and embarrassing that those issues did not come up to the management line that would enable them to put on the audit committee agenda. And that's a failing I would not like to see again," Buckley said.

But Gleeson emphasized his view that the bank was guilty of a technicality. He insisted that the real rates charged were competitive with other banks' rates, not excessive, but were illegal because the bank had mistakenly informed Irish regulators that they were charging even lower rates. He also noted that the bulk of incorrectly charged transactions involved amounts smaller than euro30 (US$37.50).

Gleeson, Ireland's former attorney general, said the bank had already paid refunds totalling euro12.7 million (US$15.9 million) to customers who paid more than was legally allowed in foreign-exchange transactions. The bank has previously estimated its total maximum liability, including interest, at euro26.1 million (US32.7 million).

The government-controlled Central Bank in May ordered AIB to deposit euro25 million in Central Bank coffers to cover the estimated refunds.

Allied Irish Banks this year also admitted overcharging many of its customers holding student accounts, mortgages and trust funds. It also announced, under pressure from external auditors, that 10 of its current or former directors had invested in some of the bank's own tax-evading offshore accounts - and may have received unfair investment advantages versus other bank investors.

The chief executives' largely trouble-free grilling Tuesday, however, helped to push Allied Irish shares higher on the Irish Stock Exchange. They closed up 0.73 percent at euro13.81 (US$17.29).

A report published last week by J.P. Morgan identified Irish as the most profitable major bank in the 25-nation European Union, averaging nearly three times the level of profit per account versus the EU average. Bank chiefs said the high profits reflected extreme efficiency and Ireland's EU-low corporate tax rate. Consumer rights activities activists accused the bank of exploiting its dominant retail position to charge customers too much for access to their own funds.

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