Allied Irish Banks - The Currency Derivatives Fiasco

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Case Details:

Case Code : FINC032
Case Length : 11 Pages
Period : 1997 - 2004
Pub. Date : 2004
Teaching Note :Not Available
Organization : Allied Irish Banks
Industry : Banking
Countries : Ireland / US

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts Contd...

The End Result

After the fraud was discovered, AIB undertook a thorough investigation into the foreign exchange trading operations at the Baltimore headquarters of Allfirst.

The investigation was led by Eugene A. Ludwig, an eminent US banking figure. Ludwig disclosed his findings in a report (Refer Exhibit III), which blamed the weak control environment at Allfirst for the fraud. Alfred J.T. Byrne, the chairman of the financial institutions practice at LeClair Ryan, a Richmond-based law firm said, "The Ludwig report makes clear that some of those responsible for compliance with internal controls at Allfirst were asleep at the switch. One has to wonder whether the lights were out at Citi or Bank of America on these transactions as well." Following the report, AIB discontinued all foreign exchange trading operations in Allfirst with the exception of customer service obligations...


Exhibit I: The AIB Group
Exhibit II: The Value At Risk (VAR) Model
Exhibit III: Main Findings of the Ludwig Report


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