Allied Irish Banks
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| Allied Irish Banks, p.l.c.
<tr><td colspan="2" style="text-align:center; padding:16px 0 16px 0;"> | |
| Type | Public |
|---|---|
| Founded | 1825 |
| Headquarters | Dublin, Ireland
<tr><th style="text-align:right; padding-right:0.75em;">Key people</th><td>Dermot Gleeson, Chairman |
Allied Irish Banks, p.l.c. (AIB),ISEQ: ALBK, LSE: ALBK, NYSE: AIB, FWB:AIB is a commercial bank based in Ireland not to be mistaken for Anglo Irish Bank. AIB is one of the so called Big Four commercial banks in Ireland.
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[edit] Services
The bank has one of the largest branch networks in Ireland; only Bank of Ireland fully rivals it. AIB offers a full range of personal banking services, including loans, credit cards and mortgages. The bank also offers a range of general insurance products such as home, travel, and health insurance. It offers life assurance and pensions through its wholly owned subsidiary, Ark Life Assurance.
The bank also offers the full range of corporate banking services. AIB Capital Markets is the division of the company that offers international banking and treasury operations. It offers stockbroking services through its subsidiary Goodbody Stockbrokers.
Internationally, AIB operates mainly in the United Kingdom (as Allied Irish Bank (GB) and First Trust Bank in Northern Ireland), and Poland (as BZ-WBK). It also owns a 22.5% stake in M&T Bank in the United States.
[edit] Name
Allied Irish Banks is usually referred to, both inside and outside the company, as simply AIB and often incorrectly as "Allied Irish Bank". In Northern Ireland however, the bank is known as First Trust Bank, while in Great Britain, it is called "Allied Irish Bank (GB)" - the only part of the operation where the full name, in the singular, is still in day-to-day use.
Initially, the bank operated under the names of its former constituent companies, alongside a new AIB logo, a circle divided in three with an "A" at the centre. From 1970, these were replaced by "Allied Irish Banks". In 1990, AIB introduced a new logo (prompted, it was said in some quarters, by the remarkable similarity between its previous logo and that of Mercedes-Benz.). Since then, the bank has preferred to be referred to as simply "AIB", though "Allied Irish Banks plc" remains its legal name.
[edit] History
Allied Irish Banks was formed in 1966 out of the merger of three Irish banks: Provincial Bank, Royal Bank of Ireland, and Munster & Leinster Bank. The banks saw an alliance as the best way to overcome the fragmented nature of the Irish banking industry. Ireland in the mid-1960s was changing fast and the merger strengthened the banks’ position in the emerging global business era. In 1966, AIB's aggregate assets were €323.8 million – as at 31 December 2005, the AIB Group had assets of €133 billion.
[edit] Early history
- 1825 Provincial Bank commenced operations, pioneering joint stock branch banking in Ireland. It also established a branch in London.
- 1836 Royal Bank of Ireland (RBI) commenced operations. It was known for its mercantile links.
- 1837 RBI merged in Shaw’s Bank.
- 1864 The Munster Bank is established.
- 1867 The Munster Bank purchased some of the branches of the unsuccessful Union Bank of Ireland.
- 1870 The Munster Bank acquired the long established private bank David La Touche & Son.
- 1885 The Munster Bank failed due to mismanagement and fraud and is liquidated. However, Munster and Leinster Bank commences operations. Eventually it will become the largest of the three banks with the most extensive branch network.
- 1923 The Royal Bank of Ireland bought the Free State business of the Belfast Banking Company.
[edit] Recent history
Over the decades, AIB has become an increasingly international organisation. The creation of a branch network in Britain in the 1970s was followed by an investment in the USA in the 1980s.
In 1983, AIB first invested in First Maryland Bancorp in the USA. In July 1997, AIB acquired Dauphin Deposit Corporation which it merged with First Maryland Bancorp to form Allfirst in 1999.
In July 1991, the merger of AIB Group's interests in Northern Ireland with those of TSB Northern Ireland created First Trust Bank.
AIB invested in Poland by gradually building a majority shareholding of 60.1% in Wielkopolski Bank Kredytowy (WBK) between 1995 and 1996. In June 1999, AIB reached an agreement with the Polish State Treasury to acquire an 80% shareholding in Bank Zachodni SA. In June 2001, AIB completed a merger of the two banks to create Bank Zachodni WBK. The combined bank is a leading Polish bank in terms of asset size and key product market shares.
Between 1999 and 2001 AIB had an interest in Keppel TatLee Bank in Singapore, but withdrew after Oversea Chinese Banking Corporation (OCBC) acquired Keppel TatLee.
In April 2003, AIB completed a deal merging AIB’s US subsidiary, Allfirst, with M&T Bank Corporation. AIB now has a 22.5% stake in M&T, which is headquartered in Buffalo, New York. AIB maintains representative offices in the United States in Chicago, Philadelphia, Atlanta, Los Angeles, and White Plains.
[edit] Controversy
The Can of Worms at ICI was the headline in Business & Finance magazine on November 8 1984<ref>General Insurance Convention Study Group. International Actuarial Association (1985). Retrieved on 2005-08-14.</ref> Insurance Corporation of Ireland (ICI) was a wholly owned subsidiary of AIB when it collapsed in 1985 with losses of over £200 million that had arisen due to severe under-reserving and poor underwriting performance, particularly in its London office. Reinsurance business accounted for nearly half the company's income. ICI management were at fault for failing to monitor closely the activities of its London office, to find out what business was being written, whether adequate reserves were being maintained and to monitor the true profitability of the business. When it was discovered in November 1984 that ICI was operating below the statutory reserve ratio a request for further capital was made to AIB - ICI had returned a profit of £80 million the previous year.
This collapse occurred at a time of deep economic recession in Ireland. The level of Government debt at that time was 116% of GDP. But the Irish taxpayer bailed ICI out of its difficulties. The Irish Government did so to ensure a continuation of the insurance business and to protect policyholders. AIB claimed that it could not resolve the problems of ICI without putting its core banking business in jeopardy. The investment of £85 million by AIB in ICI was written off and the cost to the Irish taxpayer was £400 million<ref>"Top bank hits headlines again for the wrong reasons", The Irish Times, 2004-05-08.</ref>.
[edit] John Rusnak
It was Ireland's biggest banking scandal and the fourth-biggest banking scandal in the world when it was exposed on February 4 2002 during Michael Buckley's tenure as group chief executive. John Rusnak , a 'lone wolf' currency trader at Allfirst, a regional Maryland based bank owned by AIB racked up losses of almost $700,000,000<ref> (2002) Panic at the Bank How John Rusnak LO$T AIB $691,000,000. Gill & Macmillan Ltd. ISBN 0-7171-3563-2.</ref>, <ref>"BBC News Rogue trader 'Mr Middle America'", BBC News, 2002-02-07.</ref>
[edit] Tax evasion
The €90 million settlement that AIB reached with the revenue in respect of Deposit Interest Retention Tax evasion in 2000 was the highest tax settlement in the history of the State. The banks internal auditor, Tony Spollen<ref>Spollen, Anthony L. (2002). Corporate Fraud: The Danger from Within. Oak Tree Press (Ireland). ISBN 1-86076-038-4.</ref>, highlighted a potential DIRT liability of £100 million for the period 1986 - 1991<ref>"Parliamentary Inquiry into DIRT", Public Accounts Committee, 1999-09-27.</ref>,<ref>"The former AIB head apologised for causing offence", The Irish Examiner, 1999-09-28.</ref> but Gerry Scanlon, the group chief executive at that time rubbished this estimate, describing it as "infantile". The Oireachtas Sub-Committee Inquiry into DIRT hearing on September 27 1999 concluded that it was "extraordinary" when Scanlon told the Inquiry that he was unaware of the scale of the DIRT issue.
Four former senior executives were fined by the Revenue Commissioners on March 28 2006 for a tax settlement arising plus penalties from their interest, while employed by AIB, arising from investments they maintained in Faldor Limited<ref>"AIB's Faldor four on Revenue list", RTE News, 2006-08-28.</ref>. Faldor was an investment company set up in the British Virgin Islands to manage funds on behalf of these senior AIB executives as well as people connected to them between 1989 and 1996. The funds in the company were then managed on their behalf by Allied Irish Banks Investment Managers at a time when Mr Gerry Scanlan was chief executive of the bank<ref>"AIB's Faldor four on Revenue list", RTE News, 2006-03-28. Retrieved on 2006-08-14.</ref>.
Faldor subsequently benefited from inappropriate deal allocations, and artificial deals that amounted to €48,000 out of AIB Investment Managers' own funds.
Those cited include<ref>Underdeclaration of Income Tax and Capital Gains Tax. Faldor Revenue enquiry case. Iris Oifigiúil (2006-03-28).</ref>:
- Gerry Scanlon, chief executive AIB Group when this arrangement was in place, of Glenageary, County Dublin from whom tax and interest penalties amounting to €206,010 was secured.
- Diarmuid Moore, former director of corporate strategy at AIB, Malahide, County Dublin from whom tax and penalties of €51,044 was secured
- Roy Douglas, chairman, Irish Life & Permanent Plc and formerly of AIB, Howth, County Dublin from whom tax and penalties of €53,245.43 was secured
- Patrick Dowling, former deputy chief executive, late of Delgany, County Wicklow from whose estate tax and penalties of €13,000 was secured
[edit] Excess FX charging issues
In 2004 it was revealed that the bank had been overcharging on foreign exchange transactions for up to ten years. The overcharging affected 3 million purchase transactions of foreign drafts. Initially the projected amount of overcharging was €14m. However the bank has set aside €50m to cover the cost of refunds.
The Irish Financial Services Regulatory Authority published a Report into an investigation of AIB Group concerning overcharging its own customers for FX transactions and deal allocation and other associated issues<ref>Report of Investigstions into AIB Group on Foreign Exchange and other charging issues and Deal Allocation and Associated Issues. Irish Financial Services Regulatory Authority (December 7 2004).</ref>. This revealed excess charges of €34.2 million, including interest. AIB failed to comply with the law for a period of almost 8 years and that certain staff and management were fully aware of this at the time.
AIB announced on September 27 2006 that the final outlay in respect of restitution and interest arising from overcharging amounted to €65 million and that this included a donation of €20.6 million to an unspecified charity on behalf of customers it was unable to identify. No employee or officer of the banks is to be disciplined <ref>"AIB pays out further €31.6m due to overcharging scandal", irish Independent, 2006-09-27.</ref>.
[edit] Other charging issues
Apart from FX, the Financial Regulator discovered, following an anonymous tip-off, that AIB overcharged customers €8.6 million<ref>report fx and charging issues.pdf Progress Report, Foreign Exchange and Charging Issues AIB Group. Irish Financial Services Regulatory Authority (2004-07-23).</ref>. The account categories involved were:
- Surplus Builder, variable rate mortgage product with savings; 4,200 customers impacted; financial impact €3.6 million
- Student and Graduate facilities: 34,000 customers impacted; financial impact €1.4 million
- Overdraft limit amendments, fees incorrectly applies: 24,000 customers impacted; financial impact €600,000
- Financial & Leasing, early termination of consumer leases: 950 customers impacted; financial impact €230,000
- Personal Savings Plans Products, loan discounts: 2,436 customers impacted; financial impact €196,000
- Overdraft interest in Foreign Currency Hold Accounts, incorrect reference rate applied: 200 customers impacted
- Merchant Terminal Rental Charges: 155 customers impacted
- PPI Mortgage Top Ups: 573 customers impacted
[edit] Deal Allocation and associated issues
Between 1989 and 1996, funds of certain senior executives of AIB at the time and/or related parties were managed by Allied Irish Investment Managers Limited (now AIBIM) through a British Virgin Islands investment company, Faldor Ltd<ref>Opening Statement to Joint Oireachtas Committee. Financial Services Regulator (January 19 2005).</ref>.
Faldor benefited from inappropriate favourable deal allocations, by way of artificial deals, amounting to approximately €48,000 out of AIBIM's own funds. We have no evidence to indicate that the beneficiaries of Faldor influenced or were aware of these allocations. AIBIM's own trading funds were also used to boost, through the unacceptable practice of artificial deals, the performance of certain clients' portfolios, other than those of Faldor.
Further inappropriate deal allocation practices relating to eight transactions in the period 1991 to 1993 were identified which adversely affected the performance of two specialist unit trusts, amounting to a total of €174,000, to the advantage of other clients. These were unrelated to Faldor. While the Internal Audit function of AIB did identify some inappropriate dealing practices in 1991 and 1993, there is no evidence that the Faldor account was identified in these audits.
No disciplinary action was taken against individuals involved in these practices at the time and compensation was not paid to the unit trusts affected. When this episode of law breaking was exposed a disciplinary process was put in place within AIB and compensation has been paid to those who were disadvantaged.
Tom Mulcahy, group chief executive of AIB from 1994 to June 2001, resigned the his chairmanship of the board of Aer Lingus on May 28 2004 following the disclosure of this matter.
[edit] Current developments
The bank is currently involved in several high profile deals. Their Capital Markets division is advising the Irish government on the privatisation of the country's national airline Aer Lingus. They are also providing the finance for the Doyle family's bid to take control of the Jury's group of hotels. The bank is said to be considering selling its stake in M&T.
The bank is currently involved in a number of "sale and leaseback" deals with its properties. In 2005 it sold an extension to its Ballsbridge Bankcentre headquarters for €367m. There also plans to sell the remainder of the building for €275m, as well as the bank's branch network for €421m.
In February 2006 the bank announced record pre-tax profits of €1.7 billion, a 23% rise on the previous year and the largest ever for an Irish bank. The majority of the increase came from its Republic of Ireland operations, but with its Capital Markets, Northern Ireland, Great Britain, Poland and American divisions also making significant contributions. This led to criticism from some newspapers, as their profit per customer is up to three times that of other European banks. Irish Labour Party leader Pat Rabbitte called for more competition in the Irish banking sector. In August 2006 the bank again announced record profits for the first half of 2006, making €1.2 billion before tax, equating to €1.2 million per hour.<ref>"AIB raises forecast after six-months profit tops €1.2 billion", The Irish Times, 2006-08-02.</ref>, a figure equivalent to the earnings per hour of 156,862 people on Ireland's minimum wage.
AIB are the main sponsor's of the 2006 Ryder Cup, to be held at The K Club in Straffan, County Kildare. In May 2006 the bank launched a €5 million advertising campaign for the tournament.
[edit] Dermot Gleeson
Dermot Gleeson SC was appointed a director of the bank in May 2000 and chairman of the board in October 2003. His term of office was extended on September 8 2006 to April 2011.
[edit] See also
[edit] References
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[edit] External link
it:Allied Irish Banks ja:アライド・アイリッシュ銀行 ru:Allied Irish Banks
Categories: Companies listed on the Irish Stock Exchange | Companies listed on the London Stock Exchange | Companies listed on the New York Stock Exchange | Companies listed on the Frankfurt Stock Exchange | Companies established in 1825 | Banks of Ireland | Banks of the United Kingdom | Irish tax evaders
