AIB press conference: AIB has apologised to customers for wrongly charging them and has promised to refund €34.2 million to those affected.

"On behalf of myself and the bank, I wish to say how sorry I am and we are for the regrettable lapses and errors that have occurred and how determined I am and we are to put things right between our customers and ourselves," the bank's chairman, Mr Dermot Gleeson SC, said.

Some €26.1 million will be paid to foreign exchange customers of the bank, although AIB remains adamant that such customers had not been "overcharged" in the strict, legal sense of the word and it was under no legal obligation to pay restitution.

The foreign exchange rates charged by the bank were generally comparable with those notified by its competitors, it said, while customers paid the rates agreed or advertised. However, the bank admitted that its failure to notify the regulator of its charges was "a clear breach of law and a serious matter".

"It was a breach of the trust that should subsist between a bank and its customers and a breach of the trust that should subsist between a bank and its regulator," Mr Gleeson told a news conference following publication of the first report into overcharging at the bank.

The bank will also refund €8.1 million to customers affected by overcharging in relation to non-regulated charges following a widespread trawl of its products. Although the amount to be refunded is higher than the initial estimate of €25 million, the €50 million provision made by the bank in its annual accounts will be sufficient to cover the amount to be paid back and the cost of the inquiries.

Meanwhile, Mr Gleeson said AIB was undertaking a series of measures to address the weaknesses uncovered by the investigations.

Reflecting the fact that the current crisis about overcharging was triggered by a whistleblower contacting RTÉ, the bank has decided to strengthen the whistle-blowing arrangements for staff who wish to raise ethical issues outside their immediate line management.

"To me, that is probably the most worrying thing about all this. Somebody felt they weren't safe to go to somebody within the bank about this," chief executive Mr Michael Buckley said yesterday.

A confidential external helpline, based in Britain and a with a direct line to the bank's chairman, will be put in place for staff.

The bank also announced the appointment of Mr Eugene Ludwig, the international banking expert who led the investigation into the John Rusnak affair two years ago, as an independent adviser to the AIB board.

He will advise the bank on all actions to be taken in relation to control, risk, compliance and governance arising from recent events.

Other changes announced yesterday include a new programme to strengthen the bank's customer complaints handling. A report will be made to the board on a six-monthly basis and a new section on customer complaints will be included in the bank's annual report.

AIB will also commission an annual independent audit of fees and charges for a sample of customers and will report the results to the regulator.

The bank also noted yesterday that, in most cases where errors arose, there was an over-reliance on manual systems to apply product benefits and discounts.

To address this, the bank is planning a major technology investment to automate a wide range of processes that are currently manually driven.

It aims to have the new technology in place in all branches by mid 2006.

The bank also announced that, later this year, it plans to begin its search for a new chief executive to replace Mr Buckley, who is due to retire in February 2006. Critically, it plans to look outside the bank for candidates as well as considering insiders.

It also has plans to address what it describes as "legacy issues" in the bank's corporate culture. It is giving priority to a number of issues such as incorporating measures into annual performance reviews and into performance-related pay schemes to ensure business growth is achieved "in a well-controlled and compliant manner".

A process will also be put in place for confronting failure to escalate relevant issues, the bank said.

The board has also recently approved and implemented a detailed code of leadership behaviour for senior executives.

Meanwhile, AIB is intent on rebuilding its relationship with its customers whose response to date "has been very resilient, very understanding, a tribute to our frontline people", it claims.

Yesterday's report is the first in a series of three into the recent events at the bank. Independent inquiries are continuing into how the bank failed to notify certain foreign exchange charges correctly to the regulator, why this was not corrected for more than eight years and who was responsible for the lapse.

Mr Buckley said that the bank would take whatever disciplinary action might be required at the end of this process.

As Mr Gleeson noted: "You would expect institutions to be humane and forgiving about ordinary human error. But you would expect us to be a good deal less forgiving for disguise or covering up."