AIB's single branch office in the United States, at 405 Park Avenue in Manhattan, has since January 1st been refusing to accept pounds for exchange into euros, telling customers that it was policy not to take them any more.

However, yesterday, after a query from The Irish Times, the bank announced that it was in the process of changing its policy. It would, from yesterday, be able to accept pound notes from any AIB account holders while they remained legal tender, having got around a problem caused by its US broker refusing to accept Irish notes from January 1st.

The bank's refusal to accept Irish notes, which are legal until February 9th when they must be exchanged for euros or another currency, left some callers to the Park Avenue AIB branch in the past few days frustrated and angry.

"It makes no sense an Irish bank not accepting Irish notes," said a New York resident who was turned away yesterday after seeking to change several hundred pounds. "I was irate. It is outrageous when you think about it."

The would-be customer was advised to take the pounds to Thomas Cook's. However Cook and other foreign exchange bureaus will not change pounds into euros; they must exchange them into dollars first. Cook's rate yesterday was $1.01 to the pound plus a 0.1 per cent surcharge, compared to the official rate of $1.13 to the pound.

Ms Karen Casey, AIB senior vice-president for retail and business banking, said in New York the bank's broker would not accept pounds to clear them into euros themselves and it had just found a new clearing source for the Irish currency. "So, effective from today, we are now going to be accepting Irish pounds." An AIB spokeswoman in Dublin said: "Now we are shipping them directly to Ireland ourselves."

Pounds would only be accepted from customers who had accounts with AIB in New York, the AIB executive said initially. However, asked about the possibility of antagonising long-standing AIB clients whose accounts were in Ireland, Ms Casey conceded: "We have never turned around an AIB customer and left them out there totally in the cold. Obviously if a branch called us up and asked us to accommodate a customer we would do everything we can within our regulatory requirements to do so." Asked about the situation for someone with an AIB account in Ireland who walked into the New York branch with Irish notes and could verify they had such an account, she said: "We will change the money for them". However, "we have to be very careful, we can't be seen as a bureau of exchange".