State and federal bank officials expect to take a week at least to complete their investigations at Allfirst's Baltimore headquarters into how trader Mr John Rusnak beat the bank's control system and hid losses of $750 million (€859 million).
Officials from the Central Bank in Dublin and Allfirst's accountants PricewaterhouseCoopers are also engaged in one of the most intensive investigations into a bank's operating and control system undertaken in the United States.
AIB group treasurer Mr Pat Ryan, who has been at the bank since Tuesday, has been trying to establish why phoney trades were not verified in the "back room" treasury office, where the head of treasury is Mr Dave Cronin, a fellow foreign exchange trader who worked with Mr Ryan in the Central Bank 20 years ago.
The outcome of the investigation, which also involves the FBI and the US Attorney's office, could determine the future careers of senior executives at the AIB-owned bank and could impact on the bank's operations in Maryland.
Mr Maurice Crowley, chief financial officer of Allfirst, dismissed speculation that the two top bank officials in Baltimore, the chief executive of AIB in the US, Mr Frank Bramble, and Allfirst's president and chief executive Ms Susan Keating, would leave. "They have no intention of resigning," he told The Irish Times.
Ms Mary Louise Preis, Maryland's commissioner of financial regulation which has supervisory authority over Allfirst, said that while this was a serious issue for the bank, "customer deposits and the bank itself we believe remain safe and sound". Four suspended officials from the Allfirst treasury unit are being asked to replicate the phoney trades allegedly made by Mr Rusnak, to establish where the bank controls broke down and if there was collusion.
Ms Marsha Shuler of the Federal Reserve Bank in Richmond, spelled out the range of penalties that could be imposed on Allfirst for its failure to prevent the huge loss.
The least serious reprimand would be a memo of understanding, which is not a public document. A more serious offence would merit a written bilateral agreement between the supervisory bank and Allfirst that would carry the weight of law.More serious flaws in the bank's operation could result in a "seize and desist" order, she said, requiring the bank to stop some activity.
In the most serious case the State of Maryland could revoke the bank's charter.
Ms Preis has been present at the bank in South Charles Street. She said regulators were looking at the computer systems and computer printouts "to try and learn what was going on".
Allfirst was subjected to a standard examination by Maryland regulators last May but the result was not disclosed. Ms Preis said, however, "No control is going to be foolproof. The controls were there. The policies and procedures I believe were inadequate." Documents filed with US regulators show that Allfirst had foreign exchange contracts of $4.9 billion equal to 28 per cent of total assets, compared with 11 per cent of assets on average in peer-group banks, the market research firm Gimme Credit said.
Allfirst has had problems before in Maryland, losing $29 million in its portfolio of loans in foreign shipping in 1998, after which executives lost their annual bonuses.
While the company underperformed in equity and assets in the late 1990s, it has shown marked improvement in the past year. From January to September 2001, Allfirst made $149 million, an increase of 7.5 per cent year on year, and problem loans fell 18 per cent to $87.9 million.
A spokesman for the Securities and Exchange Commission, which has an oversight role in the securities market, would not confirm if it was conducting its own investigation of how phoney trades were used to hide losses at Allfirst.
