AIB's excess charging probe is complete but there's little to suggest its corporate culture has improved, writes Siobhán Creaton Finance Correspondent
It has taken AIB two years to complete its investigation into the overcharging of customers to the tune of over €21 million in the late 1980s and early 1990s.
The Republic's biggest bank said this week that it won't be taking disciplinary action against any of its staff for the fiasco that will end up costing AIB €65.8 million, when the payment of refunds, interest and a donation to charity amounting to €20.6 million is made.
AIB was found to have overcharged customers on foreign exchange services and on lease contracts and the stamp duty on ATM cards over that period.
The bank will pay out €31.6 million, including interest, after the investigation in addition to its €34.2 million liability in relation to overcharging on foreign exchange investigated in 2004. The €31.6 million includes refunds of €11 million and a €20.6 million donation to charity where the bank is unable to identify the customers who are entitled to this reimbursement.
Seasoned watchers of investigations such as this at AIB, and there have been a fair few over the years, won't be surprised at the report's findings.
No-one within the bank is to face any disciplinary action as a result of the episode. The bank said its senior management had considered this issue but decided against it due principally to the passage of time, and a lack of evidence.
The investigation began when it emerged that AIB had begun to charge a rate of commission that was above the rate approved by the regulator in 1996. It was later extended into other areas of its business.
The 2004 investigation by the Irish Financial Services Regulatory Authority revealed that some staff at the bank were aware that AIB had been charging this higher rate for a long time.
In its initial report, the financial regulator, said that at least seven opportunities arose for certain staff and management within the bank to identify and disclose the discrepancy to the relevant regulator but that this was not done.
In fact, the regulator's former chief executive, Liam O'Reilly, said the bank "deliberately hid" those facts from it for eight years.
The regulator also stated that, between January and April 2004, some individuals at AIB had moved to correct the rate of commission charged on the foreign exchange transactions from one percentage point to 0.5 of a percentage point just before the regulator raised the issue.
The regulator first learned about this problem when alerted by someone within AIB in April 2004 and raised it with the bank ten days later. The so called "whistleblower" also contacted RTÉ and the following day the investigation was confirmed.
Dr O'Reilly said the fact that the machines had been amended shortly before its intervention left the bank "open to the interpretation" that it was preparing to apply to raise the commission rate and would never have disclosed the problem to the regulator or its customers.
It stated: "The failures within AIB uncovered by the investigations are completely unacceptable. We will not tolerate such practices within the financial services industry."
At the time, the then AIB group chief executive, Michael Buckley, attempted to explain away the embarrassing episode describing it as "an administrative cock-up".
He was also forced to apologise to staff when it appeared that senior management were washing their hands of any knowledge of the events uncovered and ensuring that, if there was any blame to be laid, it would fall on the shoulders of more junior officials.
When the report into the foreign exchange overcharging saga was issued in 2004, up to 10 senior AIB managers were understood to be at the centre of a disciplinary process.
Seamus Sheerin, who was formerly head of the bank's strategic development unit that investigated the overcharging to customers on foreign exchange transactions, was the first official to be publicly sanctioned by the bank. He resigned last year after settling a legal action against his former employer.
In the action Mr Sheerin alleged that responsibility for the overcharging affair went right to the top of the bank and he named Mr Buckley, the bank's UK managing director, Aidan McKeon and the Republic's managing director, Donal Forde. They each rejected the allegations.
The investigation, overseen by former Central Bank governor, Maurice O'Connell, also dealt with interest overcharging on other products and services that arose in the 1980s.
The bank said that €10.5 million was overcharged on foreign exchange due to the application of "incorrect margins" before 1995. Some €11 million is to be repaid to customers as a result of the examination of other overcharging cases. The biggest refunds are in respect of payment protection insurance amounting to €4.6 million. A further 29 unspecified charging errors will result in refunds of €2.7 million.
In addition, customers stand to receive €1.4 million due from the early terminations of lease contracts and €1 million for the inconsistent application of affinity schemes on certain products. Some €700,000 is due for stamp duty wrongly charged on ATM and Laser cards.
Another €600,000 is due to customers of AIB branches in Waterford and Tramore.
AIB's group chief executive Eugene Sheehy said the bank was satisfied that the investigations are now complete and that the bank had put new systems in place to ensure its more than one million customers receive "the levels of transparency and service to which they were fully entitled to expect at all times".
It was another public act of contrition from AIB to its customers and an attempt to reassure them that the bank's corporate culture had improved.
But then again, the bank was cynical enough to issue the report on a day when the Taoiseach's difficulties were taking up acres of newsprint and the Aer Lingus flotation was the big business news.
The British Labour Party's infamous act to use such days as "a good day to bury bad news" comes to mind rather than any sea-change in the corporate culture of Ireland's biggest bank.
