In this case study we will discuss the losses sustained by Allfirst Financial Inc. and Allfirst Bank in foreign exchange trading. The primary person responsible is john N. Rusnak.

In this first part we look at the relationship between AIB/Allfirst, treasury and foreign exchange trading.

The AIB/Allfirst relationship

Allfirst, formerly knows as First Maryland Bancorp, was partially acquired by AIB in 1983. By 1989, Maryland was merged into AIB as a wholly-owned subsidiary. It's name was changed to Allfirst in 1999.

AIB thus allowed Allfirst to have its own management team and board of directors (with minority representation from Dublin). However, AIB wanted more control in Allfirst's treasury operation. AIB believed that it had more sophisticated treasury operation and by having presence in this area, they will also be able to monitor Allfirst. This was done by sending David Cronin (a senior AIB executive) as treasurer into Allfirst's senior management.

Mr. David Cronin had vast experience in treasury operations, especially currency trading.

Initially, the new treasurer was not well received, but soon. things became more open and comfortable for the treasurer.

The treasurer reported to the CEO and at times the CFO. The treasurer also maintained strong tied with AIB in Ireland. He applied AIB's treasury policies in Allfirst, and also maintained relation with former colleagues with whom he discussed business issues.

AIB's senior management respected Mr. Cronin for his treasury expertise. Even though Allfirst’s senior management continued to believe in the treasurer’s competence, over time Allfirst’s management had increasing problems with his performance.