AIB has set a deadline of 12 months for Allfirst management to turn the business around. The current review is expected to lead to lay-offs at Allfirst in August, sources close to the bank have said.

Ms Susan Keating will step down as chief executive of Allfirst, AIB's fraud-struck US subsidiary, at the end of the month.

Her resignation comes less than six months after the US bank lost $691 million (€684.5 million) due to the activities of rogue trader John Rusnak.

Allfirst's executive chairman, Mr Eugene Sheehy, who took up the post in the wake of the Rusnak crisis, will assume the added responsibilities of president and chief executive. He becomes the first Irishman to take the helm at the US bank.

In a statement issued last night, AIB said that the management team at Allfirst had been conducting a major strategic review of the business and had implemented a series of changes in reporting structures between Allfirst and AIB.

"Susan's deep organisational knowledge and key insights into our business have been vital to our considerations," Mr Sheehy said. "We agree on most issues but have debated some aspects of the best way forward for the company."

Ms Keating, who joined Allfirst in 1996 and became chief executive in January 2000, resisted intense pressure to resign her position after the Rusnak fraud was uncovered last February.

Six Allfirst executives were sacked for failing to spot the rogue trades, the highest ranking being head of treasury, Mr David Cronin.

AIB defended the decision to retain Ms Keating at the time, saying it wanted to avoid "destabilising" the US operation and alienating staff and customers.

In addition, she had only been in charge of the treasury business for 12 months while the fraud had been under way for five years.

But some observers felt she had been effectively sidelined since Mr Sheehy, a former managing director of AIB Bank, was sent from Dublin to Baltimore to oversee the review at Allfirst.

The first woman appointed to AIB's executive management committee, Ms Keating joined Allfirst from Nationsbank of Maryland where she was chief executive.

"Susan's strong convictions, professionalism and management have served Allfirst well," Mr Sheehy said.

"Her leadership qualities and focus on business and customer concerns, especially this past year, have been of great value," the executive chairman added.