Two Citibank foreign exchange representatives who dealt with Allfirst trader Mr John Rusnak have been suspended indefinitely, a bank spokesman in New York confirmed yesterday. From Conor O'Clery, International Business Editor, on Wall Street

The employees were suspended in early March "for reasons unrelated to trading activities", the spokesman said, an apparent reference to the extent or type of entertainment they provided for the income-generating Allfirst trader.

The suspensions at Citibank show how the Rusnak affair is reverberating in major US banks, where internal inquiries have been set in motion to determine any possible wrongdoing on their part. They also shine a light into a world where banks lavish entertainment and other favours on clients and traders to encourage their business.

The Ludwig report stated that brokers and traders who wanted to "cover" the Allfirst trader, who was generating huge volumes of foreign currency trading, "heavily entertained Mr Rusnak, with meals, hotel stays, golf trips, Super Bowl tickets and other travel. He apparently liked to be wined and dined, and the brokers obliged." A person close to Mr Rusnak confirmed that the trader was often taken on expensive trips, including a visit to the 2000 Open Golf Championship at Pebble Beach, California, where he and another trader, whom he identified as a Bank of America employee, dined in company with a famous golfer. Mr Rusnak also told a friend he was "consumed" by how important he was, and has related how other bank representatives queued to shake his hand at the annual Robin Hood ball in New York.

The New York Times identified the suspended Citibank traders as Mr Richard Marra, based in New York, and Mr Joseph Craven, based in Singapore. It said Mr Rusnak took his business from Merrill Lynch to Citibank when Mr Marra moved to Citibank in 2000. Mr Marra, whose New York telephone number is unlisted, could not be contacted yesterday.

A Bank of America spokesman said yesterday that none of its employees had been suspended because of improper entertaining of Mr Rusnak, and made the point that entertainment was part of the process of attracting profitable business.

"In our investigation to date we have not found that any of our employees received improper benefits from Mr Rusnak," the spokesman said. "Providing entertainment to clients is a widely used business practice that serves to deepen client relationships and create business opportunities. Bank of America provides major foreign exchange clients with various types of entertainment from time to time, such as business lunches and dinners and periodic sporting events."

The bank had no comment on the claim that one of their traders entertained Mr Rusnak lavishly at Pebble Beach. The trader, whose name was given to The Irish Times, was not answering his telephone in his San Francisco office.

Citibank and Bank of America also reacted sharply yesterday to implied criticism in the Ludwig report of their dealings with Mr Rusnak.

Mr Ludwig said the size and scope of Mr Rusnak's trading would have appeared unusual to "anyone paying attention" in the banks with which the trader had prime brokerage accounts and that to date "we have only a limited record of the prime brokers communicating or attempting to communicate with personnel at Allfirst at a level above Mr Rusnak." The deals were for synthetic loans disguised as derivitives, the report said.

Citibank responded tersely: "The report makes clear that responsibility squarely rests with Allfirst personnel." A Citibank spokesman pointed out that Mr Ludwig specifically noted that Citibank "took the proactive step of bringing a large exposure to the attention of the parent company AIB to be sure that they were aware of the exposure; in fact, the report characterises this as an opportunity to detect the fraud that was missed by Allfirst and AIB." This refers to an inquiry made by Citibank to AIB Group treasurer, Mr Pat Ryan about a large gross monthly prime-account settlement which the report stated was due to occur in April 2000. In response to a "discreet inquiry" to Allfirst, risk-assessement personnel in Allfirst provided reassurances to AIB but no one at either bank "inquired why the offsetting gross Citibank positions were so large", Mr Ludwig said.

Mr Ludwig's report also refers to an email which could have alerted a bank about the unusual nature of Mr Rusnak's trades.

Sent to a bank not identified in the report, the e-mail stated: "I have come to you with a problem, we need to outsource our balance sheet funding," making clear Mr Rusnak "was using the funds to raise money for his trading activities". Bank of America sources do not dispute that it received such an email.

A Bank of America spokesman said yesterday: "All the checks and balances of our prime brokerage service performed properly with respect to the Allfirst account. We continue to conduct our own internal review of Bank of America's interactions with Mr Rusnak and the bank's prime brokerage relationship with Allfirst. We have not found any evidence that any bank of America employees colluded with Mr Rusnak."

The bank had not suspended any employees in connection with the matter "and we do not expect to do so in the future".