THE irish Bank Officials' Association (IBOA) is seeking an explanation from AIB about the placing of £250,000 worth of Dana shares in two AIB employee pension funds as part of an alleged share support operation in 1988.

IBOA general secretary Mr Ciaran Ryan said he was "extremely disturbed" at the admission by AIB that one of its subsidiaries had bought Dana shares, which were being sold by another subsidiary, and placed them in the pension funds.

Meanwhile, The Irish Times has learned that the Central Bank acted in 1995 to curb any risk of a practice by bank subsidiaries known in the market as "stuffing". The Central Bank insisted that a new code of conduct produced by the Stock Exchange included provisions to cover the behaviour of investment firms.

"Stuffing" could potentially arise, according to a market source, where bank-owned fund management or investment operations came under pressure to help the stockbroking subsidiaries of the same banks by buying shares which the brokers were trying to sell.

The IBOA's Mr Ryan said yesterday that the funds used to buy Dana shares in 1988 belonged to members. "They belong to the employees and it is absolutely not on that the bank would play around with them," he said.

AIB's admission in relation to the Dana shares followed a claim at the Committee of Public Accounts' DIRT inquiry on Tuesday by the bank's former group internal auditor, Mr Tony Spollen, that AIB - rather than publicly admit that a share issue had failed - put the stock into the pension funds.

The bank has insisted, on the basis of investigations carried out on its behalf by two independent law firms, that the transactions involved "no notifiable offence".

Mr Ryan said that IBOA members who are current trustees of the pensions funds have been told to raise questions about the "investments" at the next meeting of trustees.

While the amount involved was small - the pension funds paid £250,000 (€317,435) for the Dana shares - Mr Ryan said the issue was "a very serious one".

Asked if the member trustees at the time were informed about the placing of the Dana shares, he said that, as far as he could ascertain, nobody was given any details of the investment.

At the end of 1998, the market value of the assets in AIB's pensions schemes in Ireland and Britain was £1.2 billion, according to the bank's latest annual report. Industry sources said yesterday "stuffing" could happen when the fund managers involved had to decide what to do with the shares.

The danger for some clients was that their pension and investment funds could be "stuffed" with shares which were not worth the prices paid for them.

As some of the largest funds management operations in the Irish market, the banks' subsidiaries regularly buy and sell shares for client accounts.

The Central Bank's concern was that because the banks also had stockbroking subsidiaries, there was a risk that shares could be bought and placed in client accounts by investment managers acting to support a bank stockbroking subsidiary. One reliable industry source insisted that the practice "was not unknown here" in the 1980s and early 1990s.

In 1995, the new code of conduct required each investment management firm to ensure that it took reasonable care to deal "to the best advantage of its clients" in carrying out transactions with or for clients.