AIB's chief executive Mr Michael Buckley says he's "hugely disappointed" that the alleged activities of a rogue trader weren't uncovered at an earlier stage.
Ireland's biggest bank has uncovered a suspected €860 million fraud at its US subsidiary Allfirst.
The alleged fraud is thought to have occurred in Allfirst's foreign exchange trading area.
Mr Buckley today said: "We are hugely disappointed that our Allfirst control procedures failed to uncover this situation at an earlier stage.
"The investigation now under way will determine not only how it arose, but also how we can guard against any recurrence."
He added: "The group's underlying business and profitability momentum is not impaired by this once-off blow. Our capital adequacy continues to be strong."
In a statement the company said: "These losses arose on a series of unauthorised transactions in a number of foreign currency contracts.
"An individual dealer entered into a variety of spot and forward foreign exchange trades, which were apparently offsetting foreign currency option positions also entered into by the same dealer."
PA