ACC Bank lent "in excess of" 200,000 each to around 2,300 customers to buy its "geared" tracker bonds, the Sunday Tribune can reveal.

Loaded with tax, charges and rising interest rates, these bonds have barely broken even in the past three years despite a boom in the stock market.

Tiny ACC Bank's tracker sales, including non-borrowed money, soared to over 650m in little over a year, a sum that startled larger European banks.

ACC reaped estimated income in the region of 25m in 2003/2004 alone. It made so much that when it stopped selling these bonds in 2005, after a media furore, its pretax profits slumped by more than half. In the previous two years they had nearly doubled on the back of these bonds.

But the bonanza came at a high price, with staff and customers voicing serious concerns about how the bank handled the phenomenon. An internal review revealed that 334m sales for one bond alone, Solid World Bond 5, were mostly processed in a "2/3 days" rush that stretched staff and systems to breaking point.

The report concluded:

"The problems with the processing of SWB5 are serious. . . The bank does not have the necessary systems, procedures, or capacity. . . particularly when one takes into account system stability and operational issues."

Our sources voiced concern at how sparse staff and a computer system that had just had "open heart surgery" dealt with tens of millions worth of orders per hour in the last-minute frenzy.

One asked whether all intermediaries who sold early lend-to-invest bonds had been appointed and whether the advisory process was fully and correctly completed for later issues, as required under new regulations.

ACC Bank responded to this: "We are satisfied that ACC Bank keeps pace with the standards expected of the industry. We continually endeavour to comply with the spirit of all codes as well as the specific regulations."

Later we again asked the bank specifically how many intermediaries had been appointed and how many 'fact-finds' . . . legally-required customer profiles . . . had been completed in full. It declined to comment further.

Potential problems were noted at an ACC Bank training seminar in Athlone in 2004, when staff were told:

"The compliance officer is of the opinion that at the moment there is potentially a serious breach of laws and/or regulations."

The ACC Bank spokesman stressed that regulatory changes were new at the time.

"Intensive training is an ongoing feature to ensure products and services are delivered in line with best practice, " he said.

Sources agree the bank did its utmost to "get it right" later in 2004, and rushed out policy documents that repeat many times . . . underlined, in bold type and in capital letters . . . how staff should deal with the regulatory issues raised here.

However, many staff were unhappy with the whole concept of borrowing to invest and the pressure to sell more products as senior executives vied to impress the bank's new owners, Rabobank, after it took over ACC in 2001.

"The turnover of senior staff has been high, " a source noted.

The Financial Regulator warned against geared trackers in November 2003, not long after ACC Bank's first bond, but before two others reaped record sales in 2004.

(Other banks also offered geared trackers at the time. )