The chief executive of Allied Irish Bank proposed that it be sold to a US bank at the height of last autumn's disclosures over tax evasion by former executives and the overcharging of customers, The Irish Times has learned.
Michael Buckley put the idea of a takeover by M&T Bank to the board but it was rejected by the non-executive directors.
Sources close to the board claim that the initiative was supported by Dermot Gleeson SC, the chairman of AIB, and that it was inconceivable that an issue of such seriousness would be brought before the board without his support.
But the bank said last night that Mr Gleeson did not back the proposal which it claimed came up as part of a wider, 10-year review of strategic options for the bank. Mr Gleeson is out of the country until next weekend and was unavailable for comment last night.
AIB has a 23.2 per cent stake in M&T, which it acquired following the 2003 merger of its US subsidiary, Allfirst, with the Buffalo, New York-based bank. AIB decided to withdraw from direct involvement in the US market after one of its traders, John Rusnak, fraudulently ran up foreign exchange losses of $691 million in February 2002.
The merger of AIB and M&T would have been in effect a reverse takeover of the Irish bank, which is the larger of the two institutions, because the US bank would have ended up with control of the board of the enlarged entity. At the time of the talks, AIB's shares were trading at around €13, valuing the bank at €11.3 billion while M&T shares were valued at around $97, putting a value of just over $11 billion, or €8.7 billion at today's exchange rates, on the US group. AIB shares have subsequently moved ahead to around €16 while M&T's are trading at around $100.
A spokeswoman for AIB confirmed yesterday that the transaction "was discussed at the board as part of an overall 10-year planning process". She denied that the proposal included an extension of Mr Buckley's term in office which is due to expire when he turns 61 next February.
"If such a transaction had taken place, Michael might have stayed on to oversee its completion. There is no suggestion of his term being extended," she said.
Mr Buckley - who was paid €1.445 million last year - was under pressure to consider his position in the bank last autumn in the wake of the overcharging and tax evasion scandals. Refunds to customers and other costs associated with the scandals have cost the bank €50 million but barely dented profits which topped €1.4 billion in 2004, a rise of 40 per cent on the previous year.
Last March the bank named Eugene Sheehy as Mr Buckley's successor but have not yet set a date for the handover.
Informed sources said the proposal did not go through the formal internal channels and was brought directly to the board by Mr Buckley with the support of Mr Gleeson. The bank's spokeswoman said the group's executive committee, which would normally vet such an initiative, was "informed" of the proposal.
She said that what was discussed was not "a formal proposal" and had to be seen in the context of the review of options being carried out by the bank's management at the time. "A number of scenarios were discussed," she said.
Mr Buckley sits on the board of M&T while the chairman, president and chief executive officer of the US bank, Robert Wilmers (70), is a non- executive director of AIB.
The other non-executive directors of the bank include: Adrian Burke, the former managing partner of accountants Arthur Andersen; Kieran Crowley, the former chairman of the Small Firms Association; Padraic Fallon, the chairman of Euromoney; Don Godson, the former chief executive of CRH; Sir Derek Higgs, a UK businessman; John McGuckian, the chairman of Ulster Television; Jim O'Leary, an economics lecturer at NUI Maynooth; Michael Sullivan, former US ambassador to Ireland; and Jennifer Winters, the chief executive of the Barretstown Gang Camp charity.
The executive directors are Colm Doherty, the managing director of AIB Capital Markets; Gary Kennedy, the group director of finance; and Aidan McKeon, the managing director of AIB Group UK.
