AIB chairman Mr Lochlann Quinn admitted last night that his confidence in the group had been dented by the Allfirst fraud. "I have less confidence today than I had three days ago because I didn't believe that this could happen and it has happened," said Mr Quinn during an interview on RTÉ's Six One news programme.

The chairman said the fraud had been allowed to happen through a "breakdown in internal controls" but that it was almost impossible at this stage to work out how exactly the estimated €864.5 million (£684 million) losses had been incurred. "Until we've done a comprehensive investigation, I can't say how our systems were overwritten," said Mr Quinn.

He said he still had faith in senior management at Allfirst in Baltimore, but that the board would have to get "the final analysis" before further judgement could be made. "It has happened and it shouldn't have happened."

Mr Quinn said the bank had "considerable evidence of internal collusion in the fraud" and "some evidence of external collusion". Such evidence included forged documents, he said.

The chairman said his confidence in AIB management in Dublin and Poland had been unaffected by the fraud, and he assured AIB customers and staff that the fraud presented no risk for them.

He acknowledged that AIB shareholders would be "very disappointed".

Mr Quinn said he believed the group would recover from yesterday's news.