While the Ludwig report underlined gross incompetence at Allfirst, it has become clear that turmoil in the banking world in Maryland in the 1990s played a significant part in creating the conditions for the recent trading fiasco.

Ms Susan Keating, the Allfirst chief executive who survived the Ludwig report, came to the bank in 1996 six months after she abruptly left her job in Maryland National as executive vice president.

Maryland National, crippled by bad real estate loans, had been taken over two years earlier by North Carolina-based NationsBank and Ms Keating clashed with a top NationsBank executive, Mr Eugene Taylor, over the running of Maryland National.

A former English teacher, Ms Keating was described as slow to make decisions and with a heavy outside schedule as a member of about 10 boards, including the Children's Museum and Union Memorial Hospital.

This enhanced her image as a good corporate citizen, but did not sit well with Mr Taylor, who once described himself as abrupt and lacking patience, and who was intent on bringing a more aggressive culture to the bank.

Mr Taylor sometimes shouted at her in front of staff, according to press reports at the time.

Ms Keating was put on administrative leave, then returned unexpectedly one day. Mr Taylor confronted her, saying: "We have to talk, right now."

And later that day she left the bank for good.

Mr Frank Bramble was also a product of Maryland National where he had risen to become president and chief executive.

He resigned two months after it was taken over by NationsBank to become president of Allfirst (then known as First Maryland).

Some months after Ms Keating departed, Mr Bramble hired her as head of retail banking, and in 1999 made her chief executive officer of Allfirst while he moved on to become chairman, leaving the day-to-day running of the bank to her.

The Baltimore Sun yesterday described how Mr Bramble introduced Ms Keating to staff in an Ocean City hotel crying: "You will all love Susan Keating."

Allfirst was not a happy bank however. There was reportedly resentment among senior management at the takeover by the team that had been at the helm when Maryland National bank struggled with its bad loans.

High executive turnover and cost-cutting took precedence over controls, the Baltimore Sun said, quoting former employees who said managers feared for their jobs if they did not produce good earnings figures.

It named several top executives who left the bank as Ms Keating earned the nickname of the "velvet hammer" for her soft method of firing people.

The cost-cutting culture meant that $10,000 could not be found for a data feed from Reuters that would have provided a cross-check of currency rates trader John Rusnak was using.

For all this, the bank's performance was unspectacular in a period of fast economic growth in the US. Profits remained flat in 1999 and 2000 and NCB Stockbrokers said that Allfirst had little momentum, a management deficit, and few prospects of expanding.

Last year the AIB-owned bank matched the industry average for return on assets, but has yet to match its 1998 level of net income. Sceptical reaction in the US to the fact that a velvet hammer has not been applied to top managment in Allfirst was summed up in a cryptic report in yesterday's Washington Post.

"It's not clear how much Baltimore-based Allfirst Bank would have had to lose for its Irish owners to conclude the top executives must go," it said. "Apparently, $691 million was not enough."

Ms Keating has declined a request for interview since the Ludwig report was published.