Allied Irish Banks p.l.c. (
AIB) is a major
commercial bankAfter the implementation of the Glass–Steagall Act, the U.S. Congress required that banks engage only in banking activities, whereas investment banks were limited to capital market activities. As the two no longer have to be under separate ownership under U.S...
based in Ireland.
AIB is one of the so called "
big fourBig Four is the colloquial name for the four main banks in several countries, where the banking industry is dominated by just four institutions and where the phrase has gained currency.-Australia:...
" commercial banks in the state. The bank has one of the largest branch networks in Ireland; only
Bank of IrelandThe Bank of Ireland is a commercial bank operation in Ireland, which is one of the 'Big Four' in both parts of the island.Historically the premier banking organisation in Ireland, the Bank occupies a unique position in Irish banking history...
fully rivals it. AIB offers a full range of personal and corporate banking services. AIB Capital Markets is the division of the company that offers international banking and treasury operations. The bank also offers a range of general insurance products such as home, travel, and
health insuranceHealth insurance is insurance against the risk of incurring medical expenses among individuals. By estimating the overall risk of health care expenses among a targeted group, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is...
. It offers life assurance and
pensionIn general, a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.The terms retirement...
s through its wholly owned subsidiary, Ark Life Assurance.
In December 2010 the Irish government took a majority stake in the bank. AIB shares are listed as an
American Depositary ReceiptAn American depositary receipt is a negotiable security that represents the underlying securities of a non-U.S. company that trades in the US financial markets...
(ADR) on the New York Stock Exchange, under the symbol AIB. AIB's shares were formerly traded on the Irish Stock Exchange and the London Stock Exchange, but its shares were delisted from these exchanges following its effective nationalisation. The remaining publicly-traded shares of AIB are now listed on the Enterprise Securities Market of the Irish Stock Exchange.
Internationally, AIB operates mainly in the United Kingdom (as
Allied Irish Bank (GB)Allied Irish Bank is the trading name of commercial banks operating in Great Britain. AIB Group p.l.c., registered in Belfast, Northern Ireland and regulated by the Financial Services Authority, is the legal entity which also includes First Trust Bank...
and
First Trust BankFirst Trust Bank, part of the AIB Group, is a commercial bank in Northern Ireland. The bank was created in 1991 when TSB Northern Ireland merged with the AIB Group's other interests. The bank can trace its existence back to 1816 with the founding of the Belfast Savings Bank...
in Northern Ireland), and Poland (as
Bank Zachodni WBK SABank Zachodni WBK is a Polish bank with headquarters in Wrocław, Poznań and Warsaw, offering financial products and services. The bank is one of the three largest banks in Poland. It was formed by the merger in 2001 of Bank Zachodni SA and Wielkopolski Bank Kredytowy SA...
(BZ-WBK)). In November 2010, it sold its 22.5% stake in
M&T BankM&T Bank is an American commercial bank that was founded in 1856 in western New York, and today remains headquartered in Buffalo at One M & T Plaza...
in the United States. At the beginning of 2008 AIB entered the Latvian, Estonian and Lithuanian markets by acquiring AmCredit mortgage finance business from the Baltic – American Enterprise Fund.
In 2009, Allied Irish Banks along with its competitor
Bank of IrelandThe Bank of Ireland is a commercial bank operation in Ireland, which is one of the 'Big Four' in both parts of the island.Historically the premier banking organisation in Ireland, the Bank occupies a unique position in Irish banking history...
accepted a 3.5
billion1,000,000,000 is the natural number following 999,999,999 and preceding 1,000,000,001.In scientific notation, it is written as 109....
euro bailout from the government of the Republic of Ireland as a part of the Bank Recapitalisation scheme. By March 2011 the total sum of required bailout was expected to climb up to 13.3 billion euro.
Name
Allied Irish Banks is usually referred to, both inside and outside the company, simply as AIB and often by its trade name of "Allied Irish Bank" (singular). In Northern Ireland, however, the bank trades 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
logoA logo is a graphic mark or emblem commonly used by commercial enterprises, organizations and even individuals to aid and promote instant public recognition...
(prompted, it was said in some quarters, by the remarkable similarity between its previous logo and that of
Mercedes-BenzMercedes-Benz is a German manufacturer of automobiles, buses, coaches, and trucks. Mercedes-Benz is a division of its parent company, Daimler AG...
.) Since then, the bank has preferred to be referred to as "AIB", though "Allied Irish Banks plc" remains its legal name.
The bank is often referred to colloquially as "AIB Bank", an example of a
redundant acronymRAS syndrome , also known as PNS syndrome or RAP phrases , refers to the use of one or more of the words that make up an acronym or initialism in conjunction with the abbreviated form, thus in effect repeating one or more words...
. This is due to the name "AIB Bank" being adopted for the Republic of Ireland branch banking business at the time of the 1990 rebrand (with the word "Bank" being printed in the green stripe in the logo). This version of the logo is no longer used in print advertising but can still be seen on the façades of most AIB branches in the Republic. The 'Trustee Savings Banks' similarly rebranded to "TSB Bank" in 1993.
History
Allied Irish Banks Limited was formed in
1966-Events:*13 February - The Bishop of Clonfert protests over the content of The Late Late Show, taking exception to a woman telling host Gay Byrne that she didn't wear a nightie on her wedding night....
as a new company that acquired three Irish banks:
Provincial Bank of Ireland, the
Royal Bank of Ireland, and the
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.
Early history
- 1825
-Events:*The Unlawful Societies Act proscribed both the Catholic Association and the Orange Order.*Foundation of the Provincial Bank of Ireland, see Allied Irish Banks-Births:*13 April - D'Arcy McGee, journalist, politician in Canada, assassinated ....
Provincial Bank commenced operations, pioneering joint stock branch banking in Ireland. It also established a branch in London.
- 1836
-Events:*February, foundation of the Ulster Bank in Belfast*Foundation of the Royal Bank of Ireland see Allied Irish Banks.*August following one of the coldest summers in over fifty years there is widespread failure of the potato crop.-Births:...
Royal Bank of Ireland (RBI) commenced operations. It was known for its mercantile links.
- 1837
-Events:* Shaw's Bank merges with the Royal Bank of Ireland .* August - Following a very cold summer there is widespread failure of the potato crop, as in 1836, leading to famine later in the year.-Births:...
Shaw’s Bank merged with Royal Bank.
- 1864
-Events:* 30 January - Opening of the National Gallery of Ireland in Dublin.* Foundation of the Munster Bank later rescued as the Munster & Leinster Bank. See Allied Irish Banks.-Births:...
The Munster Bank is established.
- 1867
-Events:*11 February – Abortive Fenian attempt to seize Chester Castle.*5 March – Fenian rising in County Dublin, County Cork, County Limerick, County Tipperary and County Clare....
The Munster Bank purchased some of the branches of the unsuccessful Union Bank of Ireland.
- 1870
-Events:* 19 May — The Home Government Association is established by Isaac Butt to argue for devolution for Ireland and repeal of the Act of Union.*The building of Belfast Castle is completed, to a design by Charles Lanyon and his son....
The Munster Bank acquired the long established private bank David La Touche & Son.
- 1885
-Events:*The Munster & Leinster Bank begins operations following the collapse of the Munster Bank - see Allied Irish Banks.*The Railway Tavern in Belfast is renovated and reopened as the Crown Liquor Saloon....
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
-Events:*January 13 - Beechpark, the residence of President W. T. Cosgrave in Dublin, is set on fire.*January 10 - An order is signed creating the Revenue Commissioners....
The Royal Bank of Ireland bought the Irish Free StateThe Irish Free State was the state established as a Dominion on 6 December 1922 under the Anglo-Irish Treaty, signed by the British government and Irish representatives exactly twelve months beforehand...
business of the Belfast Banking Company, which in turn bought the Northern IrelandNorthern Ireland is one of the four countries of the United Kingdom. Situated in the north-east of the island of Ireland, it shares a border with the Republic of Ireland to the south and west...
business of the Royal Bank.
Recent history
Over the decades, AIB has become an increasingly international organisation. It created a branch network in Britain in the 1970s.
AIB in the US
Then in 1983, AIB invested in
First Maryland BancorpFirst Maryland Bankcorp was the holding company for the First National Bank of Maryland, acquired by Allied Irish Banks in 1997.In 1999 First Maryland Bankcorp merged with Dauphin Deposit Corporation to form Allfirst Financial....
in the USA. In July 1991, AIB merged the Group's interests in Northern Ireland with those of
TSBThe Trustee Savings Bank was a British financial institution which specialised in accepting savings deposits from the poor. They did not trade their shares on the stock market and, unlike mutually held building societies, depositors had no voting rights nor the ability to direct the financial and...
Northern Ireland to create First Trust Bank. In July 1997, AIB acquired Dauphin Deposit Corporation which it merged with First Maryland Bancorp to form Allfirst in 1999.
After suffering large losses due to the activities of
rogue traderA rogue trader is an authorised employee making unauthorised trades on behalf of their employer. It is most often applicable to financial trading, and as such is a term used to describe persons - professional traders - making unapproved financial transactions....
John RusnakJohn Rusnak is a former currency trader at Allfirst bank, then part of AIB Group, in Baltimore, MD, United States. On January 17, 2003 he was sentenced to 7½ years in prison for hiding US$691 million in losses at the bank, after bad bets snowballed in one of the largest ever cases of bank fraud...
at Allfirst (see below) in April 2003, AIB completed a deal merging Allfirst with M&T Bank Corporation, which is headquartered in
Buffalo, New YorkBuffalo is the second most populous city in the state of New York, after New York City. Located in Western New York on the eastern shores of Lake Erie and at the head of the Niagara River across from Fort Erie, Ontario, Buffalo is the seat of Erie County and the principal city of the...
. In November 2010, AIB sold its 22.5% stake (26.7 million shares) in M&T. The shares were sold at $77.50/share and generated $2.1 billion. The sale was part of AIB's effort to raise capital amidst the ongoing financial crisis in Ireland. AIB maintains representative offices in the United States in Chicago, Philadelphia, Atlanta, Los Angeles, and
White PlainsWhite Plains is a city and the county seat of Westchester County, New York, United States. It is located in south-central Westchester, about east of the Hudson River and northwest of Long Island Sound...
.
AIB in Poland
AIB invested in Poland by gradually building a majority shareholding of 60.1% in
Wielkopolski Bank KredytowyWielkopolski Bank Kredytowy SA was a Poland-based commercial bank, which offered the normal range of retail and commercial financial services through its branch network. Allied Irish Banks, its owners, merged it with Bank Zachodni to form BZ-WBK....
(WBK) between 1995 and 1996. In June 1999, AIB reached an agreement with the Polish State Treasury to acquire an 80% shareholding in
Bank ZachodniBank Zachodni S.A. was a Poland based commercial bank that offered the normal range of retail and commercial banking services. Its owners, Allied Irish Banks, merged it with Wielkopolski Bank Kredytowy in 2001 to form BZ-WBK....
SA. In June 2001, AIB completed a merger of the two banks to create Bank Zachodni WBK SA. AIB now owns 70.5% of the combined bank, which is a leading bank in Poland in terms of asset size and key product market shares. On September 9, 2010 AIB reached agreement to sell a 66% stake in BZ-WBK to Santander for 3.1 billion euro, the balance of the shares will be sold on the open market. Any purchase over 66% would have forced Santander to make an offer to buy the entire company.
AIB in Asia
Between 1999 and 2001 AIB had an interest in
Keppel TatLee BankKeppel TatLee Bank was a publicly listed financial services organisation in Singapore formed through a merger of Keppel Bank and Tat Lee bank in 1998. It was acquired by Oversea-Chinese Banking Corporation in 2001 and integrated in 2002....
in
SingaporeSingapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
, but withdrew after
Oversea-Chinese Banking CorporationThe Oversea-Chinese Banking Corporation Limited , abbreviated as OCBC Bank , is a publicly listed financial services organisation with its head office in Singapore. OCBC Bank is one of Singapore's leading local banks, with group assets of more than 224 billion SGD. It has one of the highest bank...
(OCBC) acquired Keppel TatLee.
AIB in Estonia, Latvia, and Lithuania
At the beginning of 2008 AIB entered the Latvian, Estonian and Lithuanian markets by acquiring AmCredit mortgage finance business from the Baltic American Enterprise Fund. Now AIB operates as a branch of this financial group in Latvia, Estonia and Lithuania.
In 2008 AIB operated through its local branches providing financial services under established AmCredit brand in all three countries. AmCredit operated as a single product mortgage business, but the company is expanding the range of banking products.
All AmCredit's mortgage customers automatically became customers of the AIB branch in their country. The goal of AIB is to become a full service customer focused bank in the Baltic region.
AIB in Bulgaria
In February 2008, AIB entered into an agreement to acquire a 49.99% interest in Bulgarian American Credit Bank AD, a specialist provider of secured finance to small and medium sized companies in Bulgaria.
AIB in Ireland
The Irish government received shares of €3.5bn in AIB in 2009 as part of measures to recapitalise the bank.
In April 2010, AIB announced that the Irish government would receive a stake of 16% or 17% in the bank. The Irish State had been due to receive dividends on those shares, but EU regulations state that banks that get State aid cannot make cash payments. This forced AIB to give the government shares instead.
Insurance Corporation of Ireland
The Can of Worms at ICI was the headline in Business & Finance magazine on 8 November 1984.
The 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-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 GovernmentThe Government of Ireland is the cabinet that exercises executive authority in Ireland.-Members of the Government:Membership of the Government is regulated fundamentally by the Constitution of Ireland. The Government is headed by a prime minister called the Taoiseach...
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.
John Rusnak
John RusnakJohn Rusnak is a former currency trader at Allfirst bank, then part of AIB Group, in Baltimore, MD, United States. On January 17, 2003 he was sentenced to 7½ years in prison for hiding US$691 million in losses at the bank, after bad bets snowballed in one of the largest ever cases of bank fraud...
, a "lone wolf" currency trader at Allfirst, racked up losses of almost US$700 million during Michael Buckley's tenure as group chief executive. It was Ireland's biggest banking scandal and the fourth-biggest banking scandal in the world when it came to light on 4 February 2002.
Tax evasion
The €90 million settlement that AIB reached with the Revenue Commissioners in respect of Deposit Interest Retention Tax evasion in 2000 was the highest tax settlement in the history of Ireland. The bank's internal auditor, Tony Spollen, highlighted a potential
Deposit Interest Retention TaxDeposit Interest Retention Tax is a form of tax on interest earned on bank accounts in Republic of Ireland that was first introduced in the 1980s. In Ireland, income from any source is reckonable for taxation purposes...
(DIRT) liability of £100 million for the period 1986 - 1991, but Gerry Scanlon, the group chief executive at that time rubbished this estimate, describing it as "infantile". The
OireachtasThe Oireachtas , sometimes referred to as Oireachtas Éireann, is the "national parliament" or legislature of Ireland. The Oireachtas consists of:*The President of Ireland*The two Houses of the Oireachtas :**Dáil Éireann...
Sub-Committee Inquiry into DIRT hearing on 27 September 1999 concluded that it was "extraordinary" when Scanlon told the Inquiry that he was unaware of the scale of the DIRT issue.
The Revenue Commissioners on 28 March 2006 imposed a tax settlement plus penalties on four former senior executives for their interest, while employed by AIB, arising from investments they maintained in Faldor Limited. Faldor was an investment company set up in the
British Virgin IslandsThe Virgin Islands, often called the British Virgin Islands , is a British overseas territory and overseas territory of the European Union, located in the Caribbean to the east of Puerto Rico. The islands make up part of the Virgin Islands archipelago, the remaining islands constituting the U.S...
that between 1989 and 1996 hold funds on behalf of these senior AIB executives as well as people connected to them. Allied Irish Banks Investment Managers then managed the funds in the company on their behalf; at the time Mr Gerry Scanlan was CEO of the bank. 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:
- Gerry Scanlon, chief executive AIB Group when this arrangement was in place, of Glenageary
Glenageary is an area in the suburbs of south County Dublin, Ireland, part of Dun Laoghaire-Rathdown County.While there is no officially defined boundary, it is surrounded by the areas of Sallynoggin, Dalkey, Dun Laoghaire, Glasthule and Johnstown...
, County DublinCounty Dublin is a county in Ireland. It is part of the Dublin Region and is also located in the province of Leinster. It is named after the city of Dublin which is the capital of Ireland. County Dublin was one of the first of the parts of Ireland to be shired by King John of England following the...
; tax and penalties amounted to €206,010.
- Diarmuid Moore, former director of corporate strategy at AIB, Malahide
Malahide is a coastal suburban town, near Dublin city, located in the administrative county of Fingal, within the traditional County Dublin, Ireland. It has a village-like centre and extensive residential areas to the south, west and northwest.-Name:...
, County DublinCounty Dublin is a county in Ireland. It is part of the Dublin Region and is also located in the province of Leinster. It is named after the city of Dublin which is the capital of Ireland. County Dublin was one of the first of the parts of Ireland to be shired by King John of England following the...
; tax and penalties amounted to €51,044.
- Roy Douglas, chairman, Irish Life & Permanent Plc and formerly of AIB, Howth
Howth is an area in Fingal County near Dublin city in Ireland. Originally just a small fishing village, Howth with its surrounding rural district is now a busy suburb of Dublin, with a mix of dense residential development and wild hillside, all on the peninsula of Howth Head. The only...
, County DublinCounty Dublin is a county in Ireland. It is part of the Dublin Region and is also located in the province of Leinster. It is named after the city of Dublin which is the capital of Ireland. County Dublin was one of the first of the parts of Ireland to be shired by King John of England following the...
; tax and penalties amounting to €53,245.43 was secured.
- Patrick Dowling, former deputy chief executive, late of Delgany
Delgany is a village in County Wicklow on the R762 road between Greystones and the N11 road at the Glen of the Downs. It is about south of Dublin City centre....
, County WicklowCounty Wicklow is a county in Ireland. It is part of the Mid-East Region and is also located in the province of Leinster. It is named after the town of Wicklow, which derives from the Old Norse name Víkingalág or Wykynlo. Wicklow County Council is the local authority for the county...
; the estate paid tax and penalties of €13,000.
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
draftsA cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account...
. Initially the projected amount of overcharging was €14m. However the bank has set aside €50m to cover the cost of refunds.
The Central Bank of Ireland published a report into an investigation of AIB Group concerning overcharging its own customers for FX transactions and deal allocation and other associated issues. 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.
The Central Bank of Ireland knew that Allied Irish Banks were overcharging consumers in FX fees but failed to act for a number of years. They gave a parliamentary inquiry the "false impression" that they were unaware of it. The
whistleblowerA whistleblower is a person who tells the public or someone in authority about alleged dishonest or illegal activities occurring in a government department, a public or private organization, or a company...
who gave the CBOI the information was requested to come to a meeting with them but was only invited to withdraw the allegations of wrongdoing and at the same time found himself removed from his position at Allied Irish Banks without any reason given. After his case was highlighted in the media, the CBOI officially apologised on how the authorities treated him, eight years after alerting them of overcharging.
AIB announced on 27 September 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 on behalf of its customers to an unspecified charity that it was unable to identify. No employee or officer of the banks was disciplined.
Other charging issues
Apart from FX, the Central Bank of Ireland discovered, following an anonymous tip-off, that AIB overcharged customers €8.6 million. 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 applied: 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
- Trust Funds' fees charged at double the rate for withdrawals, management fees and other charges: number of customers impacted not disclosed; period of overcharges 1972-1986, and into the 90s.
No regulatory action was taken.
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.
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 chairmanship of the board of
Aer LingusAer Lingus Group Plc is the flag carrier of Ireland. It operates a fleet of Airbus aircraft serving Europe and North America. It is Ireland's oldest extant airline, and its second largest after low-cost rival Ryanair...
on 28 May 2004 following the disclosure of this matter.
Charles Haughey and the Moriarty Tribunal
In 2006, the
Moriarty TribunalThe Tribunal of Inquiry into certain Payments to Politicians and Related Matters was an Irish Public inquiry established in 1997 into the financial affairs of politicians Charles Haughey and Michael Lowry. It has revealed significant tax evasion by these and other politicians and leading...
published its report into the financial affairs of former
TaoiseachThe Taoiseach is the head of government or prime minister of Ireland. The Taoiseach is appointed by the President upon the nomination of Dáil Éireann, the lower house of the Oireachtas , and must, in order to remain in office, retain the support of a majority in the Dáil.The current Taoiseach is...
Charles HaugheyCharles James "Charlie" Haughey was Taoiseach of Ireland, serving three terms in office . He was also the fourth leader of Fianna Fáil...
. Mr. Justice Moriarty found that AIB had settled a million-pound overdraft with Haughey on favourable terms for the politician shortly after he became Taoiseach in 1979; the tribunal found that the leniency shown by the bank in this case amounted to a benefit from the bank to Haughey. According to the report, the bank showed an extraordinary degree of deference to Mr. Haughey despite his financial excesses.
Current developments
The bank is currently involved in a number of "sale and leaseback" deals with its properties. In 2005 it sold an extension to its
BallsbridgeBallsbridge is a suburb of Dublin, Ireland, named for the bridge spanning the River Dodder on the south side of the city. The sign on the bridge still proclaims it as "Ball's Bridge" in recognition of the fact that the original bridge in this location was built and owned by a Mr...
Bankcentre headquarters for €367m. There are 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 was some three times that of other European banks. Former Irish Labour Party leader
Pat RabbittePat Rabbitte is an Irish Labour Party politician who has been Minister for Communications, Energy and Natural Resources since March 2011...
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.
AIB were the main sponsors of the 2006
Ryder CupThe Ryder Cup is a biennial golf competition between teams from Europe and the United States. The competition is jointly administered by the PGA of America and the PGA European Tour, and is contested every two years, the venue alternating between courses in the United States and Europe...
, which was held at The K Club in
StraffanSruthán was mistakenly cited by Thomas O'Connor in the Ordnance Survey Letters in 1837, and adopted as the Irish form of Straffan. Seosamh Laoide used it in his list of Irish names of post-offices published in Post-Sheanchas . An Sruthán gained currency among those involved in the Irish revival...
,
County KildareCounty Kildare is a county in Ireland. It is part of the Mid-East Region and is also located in the province of Leinster. It is named after the town of Kildare. Kildare County Council is the local authority for the county...
. In May 2006 the bank launched a €5 million advertising campaign for the tournament.
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 8 September 2006 to April 2011 but he vacated his post in late 2008.
2008 share price collapse
The international credit crunch presented the first challenge to AIB - namely a dramatic fall-off in liquidity. As AIB depends to a significant extent on the international financial markets for liquidity due to an insufficient deposit base, this has impacted the bank severely. The Irish government stepped in with a guarantee which effectively granted a triple A rating on AIB debt, thus freeing up its
access to financeAccess to finance refers to the possibility that individuals or enterprises can access financial services, including credit, deposit, payment, insurance, and other risk management services...
. This step came, of course, at a cost to the Irish taxpayer, in terms of higher national debt repayments due to a greater risk premium that the markets have now placed on Ireland as a whole due to a perceived increase in systematic risk. Furthermore, any bank failure will present major costs to the Irish taxpayer.
The second and more serious problem, unacknowledged by bank management, the financial regulator and the Irish government, is
solvencySolvency, in finance or business, is the degree to which the current assets of an individual or entity exceed the current liabilities of that individual or entity. Solvency can also be described as the ability of a corporation to meet its long-term fixed expenses and to accomplish long-term...
. The question concerning solvency has arisen due to domestic problems in the
crashing Irish property marketThe property bubble in the Republic of Ireland began in 2000 and peaked in 2006, as with many other western European countries, with a combination of increased speculative construction and rapidly rising prices....
. AIB, like most Irish financial institutions, has substantial exposure to property developers in their loan portfolio. These property developers are currently suffering from gross over-supply of property, much still unsold, while demand has evaporated. The massive immigration from Eastern Europe which had propped up demand has now reversed due to rapidly rising unemployment in Ireland. Irish property developers own
speculatedIn finance, speculation is a financial action that does not promise safety of the initial investment along with the return on the principal sum...
billions of euros of overvalued land parcels such as urban brownfield and greenfield sites, and also agricultural land at an average value of €23,600 per
acreThe acre is a unit of area in a number of different systems, including the imperial and U.S. customary systems. The most commonly used acres today are the international acre and, in the United States, the survey acre. The most common use of the acre is to measure tracts of land.The acre is related...
(US$32,000 per acre or €60,000 per
hectareThe hectare is a metric unit of area defined as 10,000 square metres , and primarily used in the measurement of land. In 1795, when the metric system was introduced, the are was defined as being 100 square metres and the hectare was thus 100 ares or 1/100 km2...
) which is several multiples above the value of equivalent land in other European countries.
AIB correctly identify a systematic risk of triggering an even more severe financial crisis in Ireland if they were to call in the loans as they fall due. The loans are subject to terms and conditions, referred to as "covenants". Although AIB is not one of the banks listed as waiving these covenants, confidence in the Irish banking system is low as a result of other Irish banks electing to waive these financial safeguards in fear of provoking the (inevitable) bankruptcy of many property developers and banks are thought to be "
lending some developers further cash to pay their interest bills, which means that they are not classified as 'bad debts' by the banks."
Furthermore, AIB's balance sheet indicates that its impairment (bad debt) provisions are not being increased correspondingly, which, depending on AIB's involvement in this situation, may or may not be relevant. Their 2008 1st half financial report only accounts for an impairment provision of 0.21%. This does not appear to be consistent with the real negative changes taking place in property market fundamentals. The Central Bank told the
OireachtasThe Oireachtas , sometimes referred to as Oireachtas Éireann, is the "national parliament" or legislature of Ireland. The Oireachtas consists of:*The President of Ireland*The two Houses of the Oireachtas :**Dáil Éireann...
Enterprise Committee that shareholders who lost their money in the banking collapse are to blame for their fate and got what was coming to them for not keeping bank chiefs in check, but did admit that the Central Bank had failed to give sufficient warning about reckless lending to property developers.
In contrast, on the 7th of October 2008,
Danske BankDanske Bank is a Danish bank. The name literally means "Danish Bank" It was founded 5 October 1871 as Den Danske Landmandsbank, Hypothek- og Vexelbank i Kjøbenhavn ....
wrote off a substantial sum largely due to property-related losses incurred by its Irish subsidiary -
National Irish BankNational Irish Bank is a commercial bank in Ireland, one of the traditional Big Four. In December 2004 Danske Bank agreed to purchase National Irish Bank from the National Australia Bank for GB£967m ....
. Write downs by the domestically-owned Irish banks are only now beginning to take place.
AIB's then subsidiary
Goodbody StockbrokersGoodbody Stockbrokers is Ireland's longest established stockbroking firm with roots dating back to 1877. As well as being one of the leading institutional brokers, it is one of the largest private client firms in Ireland. It is a member firm of the Irish Stock Exchange and a SETS participant of the...
continually issued "Buy" recommendations for its then parent, notwithstanding its worsening financial position, and used Client Discretionary mandates to invest their monies in
Allied Irish BanksAllied Irish Banks p.l.c. is a major commercial bank based in Ireland.AIB is one of the so called "big four" commercial banks in the state. 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 and corporate banking...
at the start of the 2008-2011 Irish banking crisis in November 2008, which generated adverse comment. When asked if they had ever issued a sell notice on AIB, a Goodbody spokesman said "I don't know if we even keep records going back that far".
Rescue package 2009
On 12 February 2009 the Irish government arranged a €7 billion rescue plan for AIB and Bank of Ireland. The bank's capital value had fallen to €486 million, rather less than its 70% holding in Bank Zachodni in Poland.
Goodbody Stockbrokers was sold as part of the restructuring plan for €24 million. The
Financial TimesThe Financial Times is an international business newspaper. It is a morning daily newspaper published in London and printed in 24 cities around the world. Its primary rival is the Wall Street Journal, published in New York City....
commented that the lowly price tag placed on Ireland’s oldest stockbroker and "one-time bastion of Ireland’s Protestant business elite" was just another measure of the dramatic decline of the Irish economy. AIB were likely to have had to indemnify the new owners of Goodbody Stockbrokers against any legal action arising from the firm's boom-time trading.
Nationalisation
On 30 September 2010, the Irish Government announced plans to use its
National Pensions ReserveA sovereign wealth fund is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. Sovereign wealth funds invest globally. Some of them have grabbed attention making bad investments in several Wall Street financial...
to inject €3.7 billion of capital into Allied Irish Banks, becoming the majority shareholder and effectively
nationalizingNationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
the bank.
AIB needed to raise additional capital due to increasing losses on bad loans incurred from the
real estate bubbleThe property bubble in the Republic of Ireland began in 2000 and peaked in 2006, as with many other western European countries, with a combination of increased speculative construction and rapidly rising prices....
, and Irish Finance Minister
Brian LenihanBrian Patrick Lenihan was an Irish Fianna Fáil politician, who served in a range of cabinet positions, most notably as Tánaiste , Minister for Foreign Affairs and Minister for Justice....
stated that the bank was unable to attract sufficient interest from private investors. As part of the deal, Chairman Dan O'Connor agreed to quit the bank while managing director, Colm Doherty, announced he would leave before the end of the year after 13 months in the job.
In December 2010, the
European CommissionThe European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union....
approved the plans, and the Government passed emergency legislation to allow the deal to take place without requiring the approval of existing shareholders. The High Court subsequently approved the deal on Dec 24 2010, allowing the Irish government to take a 49.9% stake in the bank, rising to 92.8% following disposal of the Polish subsidiary to
Banco Santander.
AIB became the fourth of Ireland's "Big Six" financial institutions to be nationalized, following
Anglo Irish BankAnglo Irish Bank was a bank based in Ireland with its headquarters in Dublin from 1964 to 2011. It went into wind-down mode after nationalisation in 2009....
,
Irish NationwideIrish Nationwide Building Society was a financial institution in Ireland from 1873 to 2011. One of the country's oldest financial institutions, it was originally called the Irish Industrial Building Society; it changed its name in 1975 when it had just five staff...
, and
EBS Building SocietyEBS Limited was a financial institution in Ireland and was the country's largest building society. EBS has more than 400,000 members and distributes its products through a branch and franchised agency network. It handles direct business by telephone and the Internet...
. AIB was delisted from the main market of the
Irish Stock Exchange-History:The Irish Stock Exchange is Ireland's only stock exchange and has been in existence since 1793. It is an Irish private company limited by guarantee. It was first recognised by legislation in 1799 when the Irish Parliament passed the Stock Exchange Act...
on 25 January 2011 and the NYSE on 26 August 2011.
AIB Filed lawsuit against Oracle
AIB Filed a lawsuit against Oracle Financial services, India on Jan 2011 claiming the Breach of contract on Flexcube implementation.
Credit Event occurred
The ISDA Determinations Committee, consisting of 15 USA and European banks, decided that a restructuring credit event occurred with respect to Allied Irish Banks on June 9, 2011.
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