The chief executive of AllFirst, the fraud-struck US subsidiary of Allied Irish Banks, has been given just a year to turn the business round or face the axe. The deadline for Ms Susan Keating will be welcomed by shareholders irked that she did not resign over the loss of $691 million (€783 million) incurred by John Rusnak.
Both the AIB chief executive, Mr Michael Buckley, and its chairman, Mr Lochlann Quinn, offered to quit but the board was unwilling to let them go. AIB is understood to have set itself another 12-month deadline to decide whether to keep AllFirst.
If Ms Keating, working in parallel with Mr Eugene Sheehy, the subsidiary's newly appointed chairman, cannot get the operation back on track by then it could be sold.
Ms Keating was retained in order to avoid "destabilising" the US operation and alienating staff and customers, senior AIB staff said. She had only been in charge of the treasury business for 12 months while the fraud had been under way for five years.
Six executives of AllFirst were sacked for failing to spot the rogue trades. The highest ranking of these, Mr David Cronin, was head of the Allfirst treasury.
AllFirst would be an attractive purchase for several US banks, and is likely to appeal to Royal Bank of Scotland, which owns the acquisitive bank, Citizens, nearby.
Mr Buckley believes that the overall strategy he outlined when he took the top job last year of running banks in Ireland, Britain, Poland and the US with certain centralised functions was still valid.
"My view on Allfirst has been to change the model from what I call a small big bank model to a genuine community bank. That is the agenda we want to get back to and if we can't we will have to look at options for the business," said Mr Buckley.
However, it will not be put on the market yet because AIB believes the failure of its risk controls means it would have to be sold at a discount. If Allfirst were sold, AIB would not want to merge it with Citizens in return for a stake, an option suggested by several analysts. AIB itself is not thought to have been approached about possible takeovers, and is understood not to be taking seriously the suggestion by Bank of Ireland, that the two could merge.
- (Financial Times Service)
