The extent to which AIB overcharged customers for foreign exchange transactions remains unclear. However the initial estimate of €14 million has now risen significantly. AIB has lodged €25 million at the Central Bank - €20 million for the increased estimate of the amount involved and €5 million for the interest on this, which would also have to be repaid to customers.
It now appears that about two-thirds of the customers affected can be identified and will be repaid. The Irish Financial Services Regulatory Authority (IFSRA) investigation will continue for some weeks before the facts are fully established.
The public intervention yesterday of AIB chairman, Mr Dermot Gleeson, was significant. It indicates - and not before time - that the AIB board is taking this issue seriously. The relaxed reaction of the financial markets to the scandal should not obscure the risk to the bank's reputation in its home market. The affair may not have major repercussions for the bank's earnings - though it will cost it a significant amount - but that does not mean it is not damaging.
The Rusnak affair - when a rogue US trader lost $691 million - was more financially serious for the AIB Group. However the latest overcharging revelations raise serious questions about the procedures put in place following the US losses and the culture within the bank. It is encouraging that Mr Gleeson said that nothing he had seen to date would indicate that junior staff were responsible. One senior member of staff has been sent home on paid leave. It remains to be seen, however, whether anyone in the higher echelons of the organisation will be held accountable for the mess.
IFSRA has acted quickly in response to the affair. It has also sent an important signal that the interests of consumers must be paramount - too often in the past regulation has favoured producers. It is vital that this is followed through in the resolution to this affair. It is an important test for IFSRA and an opportunity for it to prove that despite the compromise surrounding its establishment, under which it remained connected to the Central Bank, it is able to take an independent, pro-consumer view. The Central Bank's approach has always been to focus on prudential supervision and there were understandable doubts about whether the structure under which IFSRA was established could give sufficient weight to the consumer.
There are still shortcomings in the regulatory structure. The principal one is that IFSRA has no power to impose a fine on AIB in this case.
New legislation will give it the ability to do this in future. However the Government has been extremely tardy in pushing through the new Central Bank bill. This delay - caused in no small part by the prolonged row over the IFSRA structure - means recent statements by senior Government ministers on the AIB affair ring a little hollow.