Former Allfirst currency trader John Rusnak will be sentenced to 7½ years in an open prison after admitting yesterday that he was responsible for the fourth-largest bank fraud in history.

Mr Rusnak pleaded guilty in federal court in Baltimore, Maryland, to one criminal charge of bank fraud relating to his cover-up of $691.2 million in losses over five years at the AIB-owned bank.

Asked by US district judge William Nickerson if he was pleading guilty because he was in fact guilty, he replied: "Yes".

Allfirst's one-time star trader, who has been living at home in a Baltimore suburb, will be sentenced on January 14th. He is expected to start serving his sentence by March 5th.

While not entitled to parole, Rusnak will have his sentence reduced by 56 days a year under normal remission, meaning he will actually serve six years and four months, legal sources said. The sentence will be followed by five years of supervised release.

As part of the plea agreement, negotiated between his lawyer Mr David Irwin and the US Attorney's office in Baltimore, Rusnak has agreed to co-operate with investigators in a continuing investigation of the fraud.

"The investigation is continuing at this time," said US Attorney Thomas DiBiagio, after Mr Rusnak's half-hour court appearance. "We intend to look at all aspects to determine that all persons who were involved are brought to justice. This was a very complicated case to understand and to detect. He did not actually steal money from the bank. He continued in this fraud to maintain his job, to maintain his salary and to maintain his bonuses." In June, Mr Rusnak pleaded not guilty to seven counts of fraudulently claiming salary and bonuses totalling $850,000 from 1997 to 2001.

Rusnak originally faced 36 years in jail - six for the base offence of fraud, 26 years because it exceeded $100 million, two years for using sophisticated means and a further two for abuse of trust. This was reduced by three years for early acceptance of responsibility, and four for co-operation, to 29 years.

The final figure was reduced to 7½ years in plea bargain negotiations on the grounds that he had saved the federal authorities the expense of a trial and had no criminal history. "Mr Rusnak has been remorseful, he has been co-operative with federal authorities and he's seeking redemption," said Mr Irwin. "He's paid a very big price for this. It is a bitter pill he has to swallow." Justice Nickerson also said Rusnak, who will be barred from working in a bank again, is likely to be required to pay restitution, though he now has no income. The plea bargain specifically states that he agreed he was responsible for the $691 million in trading losses.

To conceal losses in bets of the Japanese yen against the dollar, Mr Rusnak "manipulated the calculation of his profit and loss statements by entering false and fictitious trades and trading information", the plea bargain said.

AIB would not make any further comment yesterday. When Mr Rusnak was charged, the bank said it had stated from the outset that it had been the victim of a complex and devious fraud. A spokeswoman said it had nothing to add yesterday. Its lawyers will be closely following the FBI inquiry to determine if it might implicate other individuals as being complicit in the fraud. This could allow the bank to seek damages in relation to the fraud.