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No systemic risk management failure at AIB, says Moody's

Rating agency Moody's has confirmed its Aa3 rating for Allied Irish Banks' long-term debt, despite the bank'sannouncement of a suspected $750 million fraud at its US subsidiary, Allfirst Financial.

"Despite the magnitude of this loss, the key driver for AIB's rating is the strength of its retail and commercial banking franchise in the Republic of Ireland," said Moody's. "The bank's overseas operations in the USA, UKand Poland provide the bank with geographic diversification, but do not drive the ratings."Although AIB's investigations into the losses sustained by 'rogue' trader John Rusnak will not be known until early next month, Moody's said it does not believe there is a systemic failure in risk management throughout the Allied Irish Banks group.But the agency added: "The US franchise ... can be expected to be more materially damaged by this event. Moody's will review carefully AIB's strategic plans for the US, and will monitor the extent to which this event could overwhelm management and have implications for the business of the whole group."

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