Full text of summary and inspectors' observations from report:

Our work commenced on March 30th, 1998, the date of our appointment to investigate the affairs of the bank, and its scope was broadened on June 15th, 1998, on our appointment to investigate, also, the affairs of National Irish Bank Financial Services Limited.

In the initial stages of the investigations, we requested and received a large volume of documentation from the bank. Preliminary review of this documentation, in particular the reports of internal audit, indicated that the bank had a case to answer in each of the areas we were required to investigate.

We next initiated a programme of interviews, commencing with interviews of bank staff. This had to be suspended, however, almost immediately, when bank employees raised the issue of whether, when interviewed, they could refuse to answer our questions if there was a risk that their answers might incriminate them.

This issue had to be determined in court proceedings, which lasted until January 1999 and concluded with a Supreme Court judgement to the effect that interviewees could not refuse to answer our questions.

While these proceedings were pending we interviewed customers who had invested in clerical medical insurance (CMI) policies and further considered the documentation provided to us by the bank.

Following resolution of the court proceedings, we re-commenced interviews of bank personnel, meeting initially with branch managers and thereafter with senior management, past and present, of the bank.

Interviews with CMI policyholders and bank personnel, together with review of reports prepared by the bank relating to interest and fee amendments and to the sale of CMI policies, provided persuasive evidence of the existence of improper practices in each of the areas we were investigating. Extensive further work was, however, required to establish who was aware of, and responsible for, these practices.

Summary conclusions - improper practices:

Our conclusions on improper practices may be summarised as follows:

Bogus non-resident accounts were opened and maintained in the branches, enabling customers to evade tax through concealment of funds from the Revenue Commissioners.

Fictitiously named accounts were opened and maintained in the branches, enabling customers to evade tax through concealment of funds from the Revenue Commissioners.

CMI policies were promoted as a secure investment for funds undisclosed to the Revenue Commissioners.

Special savings accounts had DIRT deducted at the reduced rate, notwithstanding that the applicable statutory conditions were not observed.

There was improper charging of interest to customers.

There was improper charging of fees to customers.

At no time prior to our appointment did the bank address the issue of a potential retrospective liability to the Revenue Commissioners for tax arising from the irregularities in the operation of DIRT.

Culture and Operational Environment:

We consider it important to set the conclusions of our report in relation to tax evasion in the context of the culture of the period which is the subject of our investigation. This was highlighted in the report of the Committee of Public Accounts following its enquiry into DIRT, published in December 1999. The problem of DIRT evasion was an industry-wide phenomenon.

The operational environment in the bank at the time has also to be taken into account and the behaviour of individual branch managers and staff must be viewed in this context.

The branch network was target driven - there were, amongst others, targets for fee income and deposits, but limited support by way of systems or training to enable the achievement of these targets. Managers felt under pressure to meet these targets, in the setting of which they had negligible participation and which many considered unreasonable; they feared criticism and possible humiliation if they did not meet the targets.

While many branch managers operated, or played a part in, the improper practices, we have concluded that it would be inappropriate to find individual managers responsible as we believe that responsibility for the practices lay at a higher level in the bank. We must add also that we received no evidence that branch managers personally derived any direct financial benefit from the operation of any of the practices.

Summary conclusions - responsibility:

We have concluded that responsibility for the improper practices which existed rests with the senior management of the bank during the period covered by the investigations.

It was their duty to ensure that the business of the bank was so conducted that such practices did not occur and, if they did, that they were stopped immediately.

We have also concluded that the head of the bank's Financial Advice and Services Division, and a number of the financial services managers in that division, were responsible for the promotion of the CMI policies as a secure investment for funds undisclosed to the Revenue.

We have also considered the discharge of their functions by the following:

the bank's internal audit.

the external auditors to the bank;

the Audit Committee of the Board; and

the Board of Directors.

We have concluded that, in respect of the matters under investigation, none of these was responsible for the improper practices which pertained.

We are, however, of the opinion that both the external auditors and the audit committee were remiss in not requesting that management quantify the potential retrospective liability to the Revenue Commissioners arising from the high level of non-compliance by branch staff with DIRT statutory requirements reported by internal audit in December 1994.

The attitude of the bank:

We wish to record that in the first year of our investigations we believed that we did not have the full co-operation of the bank. The bank's attitude during that period is illustrated by the bank's reaction to our December 1998 interim report to the court, in which we set out evidence received from investors in CMI policies, most of whom were, at the time, customers of the bank.

We made it clear in our interim report that we had reached no conclusion on this evidence, as we had not then heard any evidence from the bank.

Notwithstanding this, we were heavily criticised by the bank, in correspondence conducted by the bank's solicitors, for having prematurely made up our minds on the matters we were investigating. The bank's criticism was described by Mr Justice Kelly, in a judgement delivered on March 19th, 1999, as wholly unjustified.

Subsequently, the working relationship with the bank improved. We had a number of helpful meetings with the bank's project director, and with other members of the bank's senior management.

At the bank's request, in October 2000 we attended a presentation from senior executives of the bank on changes in organisation, management and procedures since our appointment. We were informed that many of these changes would have taken place in any event, as part of global developments in the National Australia Bank Group, but that there had been special emphasis on compliance issues in Ireland as a result of the news media reports of improper practices at NIB.

The changes outlined at this presentation are summarised at Appendix 18. This summary was subsequently updated by the bank as part of its response to our draft report - see below.

The bank's response to our report:

We delivered our draft report to the bank on August 1st, 2003. The bank's response, dated March 24th, 2004, is a brief reaction paper, supplemented by documents set out in seven schedules. This paper is reproduced in full as Appendix 19.

In its reaction paper, the bank does not take issue with anything in the report, apologises to all those who have been affected by the events which took place, and offers to discharge the Inspectors' reasonably taxed costs of the investigation.

The documents in the schedules set out the changes made by the bank in the policies and controls relating to the matters the subject of our investigation, and indicate how customers deemed to have suffered loss as a result of the bank's actions will be refunded or compensated.

The paper also sets out details of costs amounting to 64 million incurred by the bank, or anticipated, in addressing the issues identified in the investigation. This total includes €23.3 million in respect of customer refunds and compensation resulting from the investigation, and the bank expects that there will be further payments on top of this figure.

Closing observation:

In order to form a balanced view of our findings, the report, together with the appendices, should be read in its entirety.