Officials at AIB had already moved to correct the rate of commission being charged to certain customers on foreign exchange transactions in the weeks before the financial regulator started to investigate the overcharging.
The currency converter machines used by bank staff to calculate these transactions had been almost totally adjusted to reduce the rate of commission charged from one percentage point to 0.5 of a percentage point, before the Irish Financial Services Regulatory Authority (IFSRA) contacted the bank last Friday.
An AIB spokeswoman said the bank’s senior management were unaware of this exercise and only learned about the systematic overcharging of certain customers in recent days. The estimated amount of the overcharging is €14 million.
The bank says that the staff who were involved in rectifying this problem were at a relatively junior level and had begun to prepare a report for the regulator. They did not raise the matter at a senior level in the bank, it says.
“The process had begun and we are confident that they would have informed the board,” the spokeswoman said. “This shouldn’t have happened. The details of what happened will form part of the investigation.”
The bank confirmed that officials working on the foreign exchange counters were not informed why the machines were being altered. The new lower rate of commission would have been printed out for customers, according to AIB. “That’s all we know at the moment,” the bank said yesterday.
Yesterday it emerged that it was the bank's Strategic Development Unit that noted the issue in 2002 but failed to notify the bank's executive managers.
The financial regulator has already sent officials into AIB to investigate how it systematically overcharged certain customers and is seeking reassurances from other banks that they have not engaged in similar practices. Senior inspectors from IFSRA were on site in AIB yesterday.
A spokesman for IFSRA said the inspectors were seeking to establish, independently of the bank, how the overcharging occurred. The inspectors will be seeking to establish why, when the overcharging came to light in 2002, it did not end immediately.
The IFSRA spokesman said the inspectors were concentrating on establishing how AIB was able to estimate that the amount of overcharging
during the 1996 – mid-April 2004 period was approximately €14 million. The inspectors are also going to examine the systems for ensuring that serious issues are notified to senior executives.
IFSRA will also seek to establish how the customers affected by the
overcharging could be identified and repaid. The Tánaiste, Ms Harney, said yesterday that she believed the bank should do whatever necessary to identify the customers and repay them, in order to "restore confidence" in the bank.
However Mr John Hickey, general manager, retail banking with AIB, said the “stand alone” computer system used in the bank for foreign exchange transactions recorded the date, size, and rates used in a particular transaction, but no information about the customer or the draft or cheque associated with the transaction.
The bank could estimate the likely amount involved but find it extremely difficult to identify the customers involved. He said the bank would work with customers to see if the amount of overcharging affecting them, could be established.
The Irish Bank Officials Association has called for an independent
investigation into AIB's overcharging practices.