Taoiseach assures Dail of AIB's solvency

There is no danger to the solvency of Allied Irish Banks, to its customers or shareholders, the Taoiseach assured the Dáil, following the announcement of a major investigation into a reported $750 million fraud at the bank's US subsidiary Allfirst in Maryland.

However, Mr Ahern could not guarantee that $750 million was the extent of the fraud. He did not think the Minister for Finance could give such a guarantee either because a statement issued by AIB said preliminary investigations indicated a fraud of $750 million.

"It is a fraud case and it is unlikely that all the facts would be known that quickly. So that is a matter to unfold later." He said the individual the bank had identified had "mysteriously gone missing" so the investigation was operating without his co-operation.

Mr Ahern stressed AIB was still profitable at €400 million. "The capital base remains strong. There is no danger to AIB account holders of any loss of funds or indeed to the solvency of the bank."

Responding to Opposition questions on the order of business, Mr Ahern said AIB had informed the Governor of the Central Bank, Mr Maurice O'Connell, who informed the Minister for Finance, Mr McCreevy, on Tuesday evening. AIB management also informed the secretary-general of the Taoiseach's Department and the Minister met Mr O'Connell about the issue.

"Investigations will be by the Federal Reserve and the Central Bank of Ireland will keep in contact with them on any matters arising," Mr Ahern said.

The issue was raised by the Fine Gael leader, Mr Michael Noonan, who pointed to the previous experience when the State was called in to "rescue AIB and the Irish taxpayer is still paying for that rescue".

In circumstances such as this, "rumour is the kind of rust that corrodes the system and it is very important that every piece of information is made public at the first available opportunity".

He asked if the Governor of the Central Bank had given the Minister for Finance assurances that the $750 million was the full extent of the fraud and if "the full story is now out in public".

Mr Noonan said that "while a fraud of $750 million is of enormous proportions, it is sustainable against the background of a very strong balance sheet. But the public need assurances that this is the full extent of the problem, that it has been fully investigated and that everybody knows with security what the future holds."

The Taoiseach said he was "well aware what happened in the mid-1980s with Allied Irish Bank and I well remember the lengths I had to go to as Minister for Finance to sort it out years later".

He could not give guarantees about the extent of the fraud, but stressing there was no danger to account holders' funds or to shareholders, he pointed to the bank's strong capital base. "Even after this event, AIB's capital adequacy ratio remains comfortably above established limits," he said.

"I'm sure the AIB in the interests of their customers and their branch will continue to keep them informed," the Taoiseach said.

Labour's deputy leader, Mr Brendan Howlin, called for the Minister of Finance to make a statement to the Dáil so that the "information available to him can be put into the public domain".

Mr Ahern said Mr McCreevy would be informed of developments during the day, as matters unfolded and "as they examine what's exactly involved". He added: "Obviously there are a lot of things going wrong at the bank level. Unless something has happened in the last half hour, I do not think the Minister can report on those matters."

Mr Noonan said AIB had 31,000 staff and 98,000 shareholders in Ireland and added Ireland's regulatory regime should be a primary concern. He said the "row between the Tánaiste and the Minister for Finance" had prevented the appearance of legislation necessary to establish an appropriate regulatory regime for modern international banking. He called on the Government to bring the legislation forward urgently.

The Taoiseach assured him the legislation was at the final stage of drafting. But the banking world considered the Central Bank an excellent regulator in these matters with their existing powers. "So this issue doesn't really arise but the new Bill will be brought forward very shortly" the Taoiseach added.