Investigators at Allfirst are focusing on six crucial questions at the heart of the loss of $691.2 million in foreign currency trading, one of the most important being the extent to which Allfirst resisted supervision by parent bank AIB over the years, according to US banking sources.

The disclosure on Thursday by AIB that Mr Rusnak allegedly hid his burgeoning losses over five years has raised fundamental questions about the oversight exercised by AIB of its US bank going back to 1997, and the running of the Baltimore bank by previous executives.

Mr Jerry Casey, a native of Ireland, was chairman of the board and chief executive of AIB in the US until 1999. Mr Casey stepped down that year but remains a director of Allfirst. He is also a director of the Federal Reserve Bank of Richmond's Baltimore branch. Mr Frank Bramble, until 1999 president and chief executive of Allfirst, succeeded Mr Casey as Allfirst chairman and AIB's US chief executive, and Ms Susan Keating, a regional banking executive, was promoted to president and chief executive.

On one occasion - before the scandal - when a prominent Allfirst director raised the issue of closer relations with AIB, it was made clear that the suggestion was unwelcome, according to one source, who added: "A poison pill was inserted into the system when turf wars were allowed to fester." The director named was unavailable for comment.

AIB, which has treasury operations in several US cities, competed with Allfirst for US clients to trade bonds, securities and currencies, the banking sources said. A former employee in AIB's Los Angeles office, Mr David Atkinson, was quoted as saying that a senior AIB executive was given the "cold shoulder" from Allfirst when he tried to raise the issue of a list of companies that Allfirst said should not to be approached by AIB.

The other issues at the heart of the investigation are:

• whether internal AIB auditors from Dublin conducted spot checks on Allfirst's treasury operation and, if so, why they proved inept;

• how Allfirst officials failed to spot the fraudulent trading over five years;

• whether written contracts certifying trades were forged or simply not examined;

• why action wasn't taken as far back as December when trader John Rusnak became suspect, rather than waiting until February;

• whether there was collusion.

A key to supervision of the treasury operation in banks is a system of spot checks by internal auditors. An AIB spokesman confirmed yesterday that AIB has internal auditors in its Dublin operation but would not comment on reports that they did not check the treasury operation in Baltimore.

"We're constrained from what we can say in relation to the detail of that," the spokesman said. "All this is going to be abundantly clear after the 9th of March. If that's the case, Eugene Ludwig is going to report on that."

Mr Ludwig, a former US Comptroller of the Currency, was appointed by AIB to investigate the fraud and will give his report to Dublin on March 9th.

AIB acquired First Maryland Bancorp in 1989 and renamed it Allfirst in 1999 after merging it with another acquisition, Dauphin Deposit Corporation. Although currency dealing was conducted at both AIB and Allfirst (it is now suspended at Allfirst), only AIB has an automated system confirming trades within two minutes, which could have prevented the fraud at Allfirst. Trades are still commonly confirmed by written contracts sent in the mail to the "back room" treasury office responsible for matching up traders' deals. A key question for Mr Ludwig is how the contracts arriving at Allfirst did not reveal that some of Mr Rusnak's contracts were bogus.