Allied Irish Banks decided its financial controls needed tightening almost a year before it suffered a $750 million (€854 million) loss at the hands of alleged rogue currency trader Mr John Rusnak.

The bank began working on plans last year to strengthen control over its capital markets and treasury operations in its US subsidiary, Allfirst, where Mr Rusnak worked.

But senior AIB executives failed to implement any substantial changes until now, too late to stop the huge currency losses announced last week.

This emerged as US lawyers began preparations for a possible legal action against AIB after being contacted by shareholders.

It has also emerged that an insurance policy held by AIB that could cover its losses has a limit of $200 million.

Mr Michael Buckley, chief executive, said the emergency decision last week to centralise all treasury functions in Dublin was already on the agenda.

"We are just accelerating something that has been in the plans over the last 12 months or so," he said.

This is likely to lead to regulators and investors questioning why the systems were not tightened earlier.

Mr Buckley said the bank had been in a position for six to eight weeks to move Allfirst's treasury on to a new technology platform with tighter risk controls.

Although Mr Rusnak's trading aroused suspicion as early as December, fraud was not suspected until shortly before the loss was discovered a week ago.

The AIB directors' and officers' liability insurance is designed to cover the cost of defending or settling class action lawsuits filed by disgruntled shareholders.

But, according to sources in the London insurance market, the AIB policy would also protect the bank from any theft carried out by dishonest employees. However, the policy is understood to be capped at $200 million, and it is not yet clear whether Mr Rusnak benefited from the alleged fraud.

His lawyer has said he stole no money.

Rival banks have expressed surprise that the Baltimore treasury had no line of management reporting to Dublin.

Allfirst's traders reported to the senior local management, who then reported to executives in Dublin.

But there was no line of accountability from the Allfirst treasury to the head office, with the only links being automated collection of statistics on risk exposure.

Mr Buckley said Dublin set risk standards and Allfirst's net currency exposures were fed into head office computers.

"There are group standards that apply to all of those things and there is a group information flow," he said