INVESTORS: The association representing British pension funds has strongly attacked the decision by the board of AIB to leave Allfirst chief executive Ms Susan Keating in her job.
The chairman of the National Association of Pension Fund's investment committee, Mr Alan Rubenstein, said that the losses at Allfirst represented a failure of controls overseen by Ms Keating.
"If she did know about the losses she should go. If she didn't know about it she should also go. In corporate governance the buck stops with the chief executive," Mr Rubenstein stated.
AIB shares may have traded upwards after yesterday's publication of the Ludwig report but there was disappointment in large sections of the market - not at the contents of the report - but at the limited action that AIB has taken in response to the Allfirst crisis, the fourth-biggest banking scandal.
But there was a clear division of opinion between the Irish and overseas investment community, with Irish fund managers taking the view that AIB had done as much as could have been expected while some overseas fund managers said that the absence of top-level resignations or dismissals meant the issue had been fudged.
No Irish fund manager contacted by The Irish Times would comment publicly on AIB's actions but their general view was the bank has gone as far as it could and sackings at a higher level would have a destabilising effect.
The secretary-general of the Irish Association of Investment Managers, Ms Ann Fitzgerald, said: "The board of AIB has handled the situation very well. The question of whether their actions go far enough has to be viewed with the range of decisions they took and not just on whether Ms Keating should have kept her job."
For overseas investors in particular, there was concern that, while AIB chairman Mr Lochlann Quinn and chief executive Mr Michael Buckley offered their resignations, Ms Keating's position did not come into question.
While Mr Quinn said "it was the absolute view of the board that Ms Keating was not at fault" and that the Allfirst treasury operation "was only a tiny piece of her mandate", some market sources said Ms Keating's position as chief executive should have meant that she took responsibility for the actions of her senior managers.
Mr Brian Moretta, fund manager at institutional investor Scottish Value Management felt the issue had been fudged. "One would have thought that if there was pressure on Mr Buckley then the chief executive of Allfirst should have been on the chopping block before him," he said.
Mr Moretta said that AIB has to repair investor confidence. "We're holding Bank of Ireland rather than AIB at the moment and I think we're happy to stay that way."
ABN Amro analyst Mr Eamonn Hughes said AIB would have to act quickly to restore credibility and added that one action would be to merge Allfirst with another US bank rather than selling it.
There has been speculation that Royal Bank of Scotland is interested in buying Allfirst as an add-on to its existing US banking business in New England.
Commerzbank Securities analyst Mr Piers Brown said: "There will be a lot of scepticism that this report has gone as far as it should have gone. More aggressive investors may also have hoped for some personnel changes in Dublin."
London-based analyst Mr Jonathan Gollins of Bank of America said: "I don't think this restores any confidence in incumbent management. I don't think we've heard the last of this by any means," he said, adding that the loss of investor confidence left AIB vulnerable to a takeover. - (Additional reporting by Reuters)
