AIB's Keating Given A Year - Or Else

by Justin Gorringe, Tax-News.com, London

25 March 2002

Investors reacted negatively two weeks ago to the news that no senior manager was to face the axe at Allied Irish Bank after the $691m losses at its US Allfirst subsidiary, but now it has emerged that Susan Keating, chief executive of Allfirst in Baltimore, has been given just a year to turn the business round or face dismissal.

Six more junior executives were sacked including the Allfirst treasurer, Mr David Cronin after publication of the report into the losses by US banking expert Mr Eugene Ludwig which said that a combination of bullying, laziness and weak management allowed trader Mr John Rusnak to run up the losses under the noses of his superiors.

Ms Keating was retained in order to avoid "destabilising" the US operation and alienating staff and customers, senior AIB staff said. Also, she had only been in charge of the treasury business, where the fraud occurred, for 12 months - while the fraud had been under way for five years.

AIB is understood to have set itself the same 12-month deadline to decide whether to keep Allfirst or to put it on the market. Several US banks are believed to be interested, and is known to appeal to Royal Bank of Scotland, which owns the acquisitive bank Citizens nearby.

AIB chief executive, Mr Michael Buckley has however reaffirmed the overall strategy he outlined when he took the job last year - that of running banks in Ireland, Britain, Poland and the US with certain centralised functions.

Mr Buckley said: "My view on Allfirst has been to change the model from what I call a small big bank model to a genuine community bank. That is the agenda we want to get back to and if we can't we will have to look at options for the business."

He would not confirm whether or not AIB had been approached regarding Allfirst, but is thought to have dismissed the suggestion of a defensive merger with Bank of Ireland.

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