LUDWIG REPORT: Fraud investigators seeking to identify third parties by following the Rusnak money trail, writes Siobhán Creaton Finance Correspondent

AIB has promised to pursue any issues that need further investigation, including the role of other banks in facilitating the $691 million (€783 million) fraud at the bank's US subsidiary, Allfirst.

A spokeswoman said yesterday that the bank could not confirm details of when or how this would be done, but reaffirmed group chief executive, Mr Michael Buckley's intentions to follow up on the findings of the Ludwig report.

The bank has already retained the US fraud investigators, Kroll, to follow the money trail which could help it to gather details about the counterparties to Allfirst currency trader, Mr John Rusnak's trades.

The firm has been involved in a number of high-profile investigations including searching for assets hidden by Jean-Claude Duvalier, Ferdinand and Imelda Marcos, and Saddam Hussein.

Regulatory authorities in the US, including the US Federal Reserve, will also be investigating the role of third parties in facilitating the fourth-largest financial scandal in history.

In his report, Mr Eugene Ludwig urged AIB to pursue legal and dealing partners. "There's certainly reason that those relationships ought to be explored in terms of their interplay in the fraud and I'm sure that the company will be following up vigorously," he said.

Regulators across the world are closely watching developments in the Allfirst fraud investigation. The president of the European Central Bank, Mr Wim Duisenberg, ruled out the need for any larger role for the supervising bank in the light of the fraud. "No, that is the task of national supervisory authorities," he said.

The scandal has raised concerns about possible threats to the stability of the euro-zone's financial system and questions whether new regulatory measures are necessary to deal with more-sophisticated banking activities.

The Ludwig report blamed a combination of bullying, laziness and weak management for allowing the massive fraud. And while none of the bank's most senior executives in the Republic or the US has lost their jobs, analysts believe the weakness of the bank's management team leaves it vulnerable to a takeover.

Speculation has linked AIB with Royal Bank of Scotland, with the Financial Times reporting an informal meeting between the two banks last week. AIB said it does not comment on merger speculation.

In a report yesterday, Davy Stockbrokers noted the resilience of AIB's share price but suggested the scandal would overhang the group for some time. The key question for AIB is whether it will retain Allfirst. Mr Buckley has said the business will be reviewed within the next six to nine months and has sent Mr Eugene Sheehy, the head of AIB's retail bank in Ireland, to Baltimore to oversee Allfirst.

Davy believes there is a fair chance that AIB will be ultimately forced to dispose of Allfirst, particularly if it was offered a decent price. It could also opt to merge the bank with another financial institution, taking a minority stake.