AIB Sacks Six Executives at Us Subsidiary

Allied Irish Banks today sacked six executives at its US subsidiary after an investigation concluded that a rogue trader manipulated the "weak control environment".

But Susan Keating, chief executive of Allfirst, AIB's subsidiary in Baltimore, Maryland, kept her job despite widespread expectations that she would fall victim to the cull.

Not so fortunate were David Cronin, Allfirst treasurer and boss of rogue trader John Rusnak, vice-presidents Jan Palmer and Robert Ray, Michael Husich, head of internal audit, and two middle managers, Lou Slisker and Lawrence Smith. Frank Bramble, chairman of the Maryland-based bank, will retire in June.

The sackings followed trading activities by Mr Rusnak that caused $691m in losses in the biggest trading scandal since Nick Leeson triggered the collapse of Barings bank in 1995. The episode has badly tarnished AIB's credibility and sparked speculation that it will become a takeover target.

Allied Irish chief executive Michael Buckley and chairman Lochlann Quinn both offered their resignations to the bank's board but it unanimously endorsed them in their jobs.

Mr Quinn said that Mr Palmer and Mr Ray "went to sleep on the job. We have learned the lessons from the serious breakdown in our controls which has enabled these losses to occur".

The management changes followed a report by former US bank regulator Eugene Ludwig. Hired by AIB, Mr Ludwig found that the fraud was carefully planned and implemented by Mr Rusnak over a long period and involved falsification of bank records and documents.

But Mr Ludwig said both Allfirst and AIB remained financially sound.

"They are fully capable of dealing with the loss and implementing our recommendations to strengthen their respective control structures," he said in a statement.

AIB now plans to appoint an expert to advise on how to organise risk management across the bank. The bank will centralise management and control of its treasury activities in Dublin and close down Allfirst's treasury operations and also at its other overseas subsidiary in Poland.