Early last year, Bank of America provided an AIB executive with information about an e-mail it had received from Allfirst trader Mr John Rusnak concerning a highly unusual deal Mr Rusnak was negotiating, a source in the US financial sector has confirmed.

The e-mail underlined what Mr Rusnak called a "problem" which required him to seek outside financing for his trading activities at Allfirst.

AIB responded to the message by assuring Bank of America that the deal would go through on Bank of America's terms, despite Mr Rusnak's objections to rates charged and his threat to take his business away from Bank of America, the source said.

The unusual intervention by Bank of America apparently did not raise questions in AIB about the scope of Mr Rusnak's trading at its wholly-owned Baltimore subsidiary.

An AIB spokeswoman said: "We're not making any further comment pending publication of the report." Bank of America also had no comment.

Mr Eugene Ludwig's report on Mr Rusnak's losses of $691.2 million (€790 million) at Allfirst is being examined by the AIB and Allfirst boards in Dublin.

"I have come to you with a problem. We need to outsource our balance sheet funding," Mr Rusnak wrote in the e-mail, the contents of which were disclosed yesterday by the New York Times and independently verified by The Irish Times.

In the e-mail Mr Rusnak threatened to take his business from Bank of America if he did not get a better deal on an option and loan believed to be for at least $50 million that he was negotiating. He argued that the deal would cost Allfirst $600,000 more than it should.

"You have the numbers; it is easy enough to figure out the P & L [profit and loss] consequences if we pull the entire relationship," Mr Rusnak said in the e-mail, dated March 1st, 2001. "This is the deal breaker. I am playing golf tomorrow at noon. If I don't have a revised proposal by then, I will close the prime brokerage facility and cease speaking to any of your desks." Mr Rusnak, whose custom was avidly sought by major US banks because of the huge bets he was making on currency movements, made prime brokerage arrangements with Bank of America and Citibank in 2001 after losing $211 million mainly in betting the Japanese yen against the US dollar, according to sources close to the investigation.

The Bank of America deal was one of four with four different banks that gave Mr Rusnak some $200 million in 2001 to cover losses of $211 million in the previous year.

Last week, sources close to AIB management said they had no record of any intervention by a major American bank about a Rusnak deal reported in The Irish Times to have occurred in January or February 2001.

The US Federal Reserve is continuing its separate investigation on site at Allfirst headquarters in Baltimore into Mr Rusnak's losses, despite the completion of the AIB probe by Mr Ludwig.

The targeted review is being conducted by the Federal Reserve jointly with Maryland state financial regulators, and no date had been set for its completion, a spokeswoman at the Federal Reserve in Richmond, Virginia, said yesterday. The Federal Reserve can impose huge fines on banks for irregular trading.

Allfirst switched from a federal to a state charter in 1998 when the Allfirst president and chief executive officer was Mr Frank Bramble, currently chairman of the Allfirst board. Responsibility for examining the bank's activities moved from US Treasury regulators to state officials.

This move by Maryland's largest bank may have contributed to the crisis at Allfirst by stretching the limited resources of Maryland financial regulators, who failed to uncover the mounting problems in foreign currency trading during their inspections.

With just 14 bank examiners, Maryland cannot handle its large workload and has placed a moratorium on any more banks converting to state charter, the Baltimore Sun reported yesterday.

State officials have drawn up a bill to allow the Maryland Division of Financial Regulation hire more bank examiners.

A spokesman for Allfirst said yesterday that the switch from federal to state regulation was made because Allfirst - then known as First Maryland Bank - owned a number of smaller banks under different names and charters, "and it made sense and was less complicated to come under a single charter". The Ludwig report is expected to say that Mr David Cronin, the head of the treasury operation at Allfirst, reassured AIB chief executive Mr Michael Buckley about the level of currency trading at Allfirst last year.

Mr Ludwig's report is expected to state that Mr Buckley heard an unspecified report last May about unusually large currency deals at Allfirst and that he called Mr Cronin, head of Allfirst treasury, for an explanation.

Mr Cronin gave Mr Buckley the best information he had at the time, said Mr Mark Gately, a partner in the law firm Mr Cronin has hired. The AIB and Allfirst computer systems did not indicate a problem because Mr Rusnak had not entered information about his alleged trading scheme, he said. Mr Gately also said that Mr Rusnak's name had not come up in the conversation between Mr Buckley and Mr Cronin.

Mr Rusnak has told a separate FBI inquiry that he received an e-mail from Mr Cronin's secretary asking him to check the response that Mr Cronin was compiling for Mr Buckley, according to sources close to the investigation. Mr Rusnak has testified that the figures showed net rather than gross figures for trading, the source said. During last year, Mr Rusnak made $225 billion worth of trades, making him, in his own estimation, one of the top 10 currency traders in the world.