BANK of Ireland has started an investigation into how confidential documents were "stolen" and leaked to newspapers. One of the documents referred to a £65,000 settlement the bank made with Waterford Stanley after overcharging that company.

The investigation comes at a time when the bank has taken a battering over its invoice discounting system. Almost two weeks ago it admitted that it had overcharged customers during 1991-92 for invoice discounting, claiming the total amount overcharged was approximately £250,000.

Customers of Bank of Ireland Commercial Finance yesterday received a letter from BICF saying that an investigation was under way to determine how it happened and "hopefully" to identify who is responsible.

The bank told customers there was no indication that any material, other than that already published, was taken. But it admits that it cannot say with certainty that the theft was confined to the documents referred to in weekend newspaper reports.

A Bank of Ireland spokesman said last night that the matter was of great concern to the bank. He said customers liked to think that their relationship with their financial institution was confidential.

An article in the Sunday Tribune quoted extensively from the minutes of a senior management committee meeting in 1992, where management discuss how to settle a case where the bank overcharged Waterford Stanley. The company, which manufactures cookers, found that one additional clearing day was being applied to its account with BICF and demanded a refund.

A Bank of Ireland spokesman said last night that the settlement with Waterford Stanley and the overcharging of clients in 1992 were "in the same general ball park", but he maintained they were two separate issues.

Earlier this month, when the bank wrote to customers, it said "an external source" had brought it to their attention that some of the bank's merchants may have been charged excessive discount charges during the October 1991 November 1992 period. The bank blamed a "systems error".

However it has emerged that the bank had changed its method of calculating charges on the invoice discounting system without telling clients. The bank spokesman said last night that customers should have been told of the change.

The next step, he said, was to compensate customers who had been overcharged. This is expected to take some time. Sources outside the bank have estimated that the bank may have to repay up to £500,000, but the bank maintains the figure is closer to £250,000, although it has not established a definitive figure.

. Meanwhile, the Irish Small and Medium Enterprises Association (ISME) has called on the Irish Bankers' Federation to undertake a joint study of "overcharging" by the associated banks.

ISME, which has complained vociferously about bank charges, says it is willing to part fund such an exercise.

ISME said yesterday that it had carried out a study in 1992 of bank overcharging. The study was the cause of much angry communication between the banks and the then CII, according to ISME, and it led directly to ISME's formation.

In a statement the Bankers' Federation, which represents 50 banks and other financial institutions, said the Bank of Ireland Commercial Finance matter "is an internal bank matter which that bank is addressing".

It rejected ISME's call for a study, adding that it was also mindful "of other recent ISME calls for the disbandment of the IBF.