DUBLIN, Feb 6: Ireland’s biggest bank AIB said on Wednesday a rogue dealer had disappeared after allegedly running up losses of 750 million dollars (866 million euros) at its US subsidiary, aggravating concerns about corporate probity following the Enron scandal.

Allied Irish Banks (AIB) said it had called in the US Federal Bureau of Investigation (FBI) to help track down foreign exchange trader John Rusnak, who had absconded from Allfirst Financial leaving behind a black hole of supposedly fraudulent deals.

The admission sent AIB’s share price tumbling 16 per cent, and though it was not considered likely to sink the bank, it reawakened painful memories of the collapse of the venerable British bank Barings in 1995 at the hands of a lone rogue trader, Nick Leeson.

The scare also aggravated concerns about corporate honesty following the downfall of US energy giant Enron and suggestions of accountancy sleight of hand at a number of other companies.

AIB chief executive Michael Buckley said the bank would survive the shock, but added that a probe had been launched to establish why Allfirst’s control procedure had failed to detect the suspect deals earlier.

“There is one very important respect in which it is not a Nick Leeson affair,” Buckley said. “What Nick Leeson did caused terminal damage to Barings.

“I said this is a heavy blow to the bank, but this is by no means a fatal blow to the bank. Our business will continue as usual,” he told reporters.

Irish Prime Minister Bertie Ahern quickly reassured AIB account holders and shareholders that there was no danger of the bank collapsing.

“AIB will still be profitable,” he said. “I think that is what their customers want to know. AIB’s capital base remains strong.”

Yet AIB’s share price fell 15.9 per cent to 11.45 euros here, as analysts warned the bank would suffer for a perceived lack of rigour in managing risk.

“There will now obviously be a credibility issue hanging over the company for some time,” said a statement by analysts at ABN Amro.

Rusnak, a married father of two in his forties who had worked for Allfirst for seven years, was a mid-ranking currency dealer at the company’s Baltimore, Maryland headquarters.

AIB said that it believed the trader ran up losses through a huge volume of unauthorized currency trades. He allegedly managed to avoid detection by entering a series of fictitious deals that hedged his exposure.

When the deals, known as options, were shown to be non-existent, the full scale of the financial black hole became apparent, AIB said. Senior managers have been suspended pending a probe. First estimates show the suspected fraud could cut AIB’s net profit by 596 million euros.

“The problem was that the options, in many cases, were bogus options that he had written and illegitimately and fraudulently entered into the system as if they were real contracts,” said Buckley.

He said alarm bells were first triggered “a number of weeks ago” and Rusnak was identified as a prime suspect.

“The management there moved swiftly to try and identify in what respect this trader had perpetrated the fraud and, over last weekend, as the net was closing in on the trader, he went missing and on Monday morning he didn’t turn up for work,” he said.

The jitters spread to other banking stocks and stock markets in general as investors fretted that there might be other skeletons lurking in corporate cupboards.

“It adds to the general sense of unease at a very difficult time for markets and investors in general,” said Alex Scott, analyst at 7 Investment Management in London.

“It doesn’t help that despite all the checks and balances there is still a possibility on occasion for somebody to take big risks and for these risks to go wrong,” he said.

“The fear in the banking sector is that provisions for bad debts could rise more quickly.”

AIB is Ireland’s biggest bank, employing 31,000 staff in more than 1,000 offices around the world.

Allfirst Financial Incorporated is one of the 50 largest banks in the United States. Its activities are concentrated in the Maryland area and the bank has 300 branches and 6,500 staff.—AFP