Citigroup has settled a long-running case in which AIB accused it of helping rogue currency trader John Rusnak rack up a $691m loss.
US District Judge Deborah Batts in Manhattan yesterday ordered the dismissal of the 12-and-a-half year old case, in which AIB sought $500m of compensatory damages plus punitive damages.
Settlement terms of the deal were not disclosed.
The agreement averted a trial scheduled to begin on 25 January, over a fraud that was at the time among the largest to involve unauthorised trades.
Citigroup also resolved related claims against M&T Bank, which in 2003 bought a majority of AIB's Allfirst Bank in Baltimore, where Rusnak worked.
Rusnak hid trading losses for at least five years before they were revealed in February 2002.
AIB accused Citigroup's Citibank unit, which was Allfirst's prime broker, of furthering the fraud by enabling Rusnak's sham transactions, including disguised cash advances and fake trades.
It said this let Rusnak trade more than Allfirst allowed, while pretending his currency bets were legitimate.
Citigroup countered that the evidence did not come close to suggesting it contributed to Rusnak's losses.
But in a 30 June decision allowing the case to continue, Judge Batts found "credible" evidence the New York-based bank misled AIB, perhaps hoping to keep Rusnak happy and collect more fees.
A Citigroup spokeswoman and a lawyer for AIB said the banks are pleased to have settled.
An M&T spokesman had no immediate comment.
Rusnak eventually pleaded guilty to one count of bank fraud, and spent nearly six years in prison.
AIB also sued Bank of America over its dealings with Rusnak, but dropped the lawsuit in January 2012.