DID AIB chief executive Mr Michael Buckley take sufficient action to protect group assets when he learned in May 2001 about potentially high volume foreign exchange trading at its Allfirst subsidiary in the US?

AIB sources have expressed confidence that the Ludwig report will show that Mr Buckley responded appropriately to the information which he received in May 2001.

According to AIB, the information amounted to "general comment" by a market contact rather than anything more specific.

The question now is whether Mr Buckley and other senior group executives did all that could have reasonably been expected of them to protect shareholders' funds. The Allfirst trading fraud has cost AIB some $691 million (€788 million).

Mr Buckley, according to the bank sources, contacted the Allfirst head of treasury Mr David Cronin who assured him that an impression had been created that the transactions were larger than they actually were because the bank was then using two prime bankers.

But the confirmation by AIB Group that Mr Buckley was told of potentially unusual trading at Allfirst in May 2001, raises yet more questions and concerns about how AIB Group managed risk and the ineffectiveness of its controls.

Did Mr Buckley, a former head of AIB Capital Markets, stop at contacting Mr Cronin? Did he inform Allfirst chief executive Ms Susan Keating and/or chairman Mr Frank Bramble that he had received a report of unusual trading at their operation? As an Allfirst director, did he raise the issue at an Allfirst board meeting?

If Mr Buckley spoke solely to Mr Cronin, could it reasonably be seen as sufficient to raise the matter only with the head of treasury who was running the division in which these unusual trades were apparently taking place?

Since Allfirst appears to have been given wide latitude in its treasury operation, were these issues raised at the top level of the bank? Were treasury risk reports made on a regular basis to the Allfirst board? Were these reports sought or seen by Mr Buckley?

Did Mr Buckley send or consider sending a team from group risk control or treasury to examine foreign exchange trading at Allfirst? One banking source commented "if there was as much as a smell of fraud or any loss at a branch down the country, the internal control team would be in immediately and no stone would be left unturned to establish what was going on".

When these questions were put to AIB last night, the bank issued the following statement: "The Irish Times has already been informed of the nature of the contact between Michael Buckley and David Cronin in May 2001." This is a reference to a briefing by AIB sources on Sunday.

The statement added: "We have nothing further to add prior to the publication of the Ludwig report later this week."

The Bank of England report on the Leeson fraud at Barings drew attention to the importance of investigating market information and the result of ignoring it.

One senior treasury official said that market information was "a useful unofficial control" to avoid or limit fraud. Since many traders from different banks could have worked together in the past or would know each other socially, they tended to discuss any unusual trading or patterns in the market, he added.

"We would always take this sort of information very seriously and investigate it fully. It needs to be followed up to the nth degree especially if you are not getting satisfactory information internally. Then you would need to go back to your original sources and ask for more detail," he said.