Comment: Will the banks be able to repair their reputations? Cliff Taylor,  Economics Editor, reports

It has been brewing slowly since the first revelations of AIB's foreign exchange overcharging broke 10 days ago, but the storm finally hit the Irish banking sector at the weekend. It started as a a domestic issue - albeit a serious one about foreign exchange charges - but investors around the world are now reading headlines about resignations, inquiries and tax evasion.

As the Taoiseach, Mr Ahern, said yesterday, the international reputation of the sector is now under threat. If Ireland's banking house is not seen to be in order, this endangers the future of the sector, including the IFSC.

The reaction of the financial markets in the week ahead will be instructive. AIB's share price has been fairly immune so far, though it was weak on Friday.

However, the weekend revelations that the Faldor scheme went to the very top of the organisation bring the affair to a new level. And the sudden departure of Mr Mike Soden as Bank of Ireland's group chief executive means both of the major banks face into significant uncertainty.

Facing uncertainty, investors usually "sell" and the two main banking groups have a fight on their hands to convince the markets that they can keep their businesses moving forward. AIB, in particular, has taken a big hit to its reputation.

For example, some of the very AIB executives who told the DIRT inquiry that they had no idea what was going on in relation to bogus non-resident accounts are now revealed to have had some offshore "issues" themselves.

Their customers were making up British addresses while the top dogs in AIB were availing of the British Virgin Islands.

AIB's case, of course, is that the problems were in the past and that the culture of the organisation has now changed. However, serious questions remain about how the sins of the past have taken so long to be uncovered, and the extent to which a clean break has been made.

The various investigations now under way may shed some light on this, although the promises of new controls after the Rusnak affair now ring somewhat hollow.

And why is the bank still cagey about aspects of the Faldor affair - not least the reasons for its €800,000 tax settlement?

The challenge for Bank of Ireland is different, though also serious. It must quickly replace Mr Soden with someone who can present a clear vision, after a period when it has not convinced investors about its strategy. Any sign of uncertainty in this process will be punished, explaining the indications from the bank that it will go for an early appointment, almost certainly of an internal candidate.

For the financial sector, the coincidence of upheavals at the two major banking groups is dangerous. It presents a bad picture internationally - and remember many people will just read the headlines and not delve into the detail. In the medium term, if Irish management cannot be seen to credibly run the banking sector, then overseas banks will take advantage.

The lesson internationally in recent years is that investors back strong management in the banking sector, leading to takeovers and mergers that would have seemed impossible a few years ago. Banking shares here are already weak and significant further weakness might leave them vulnerable.

There are other issues bubbling away in the background. The culture of driving profitability relentlessly forward each quarter - and incentivising staff to do so - has raised serious questions.

The most obvious is the alleged mis-selling of products to some investors - particularly elderly people. Many lost heavily in the market collapse of 2000 to 2003.

The main banks had an easy ride in the Irish market for years and made very substantial returns. Competition has increased, but an upcoming IFSRA study, reported in Saturday's Irish Times, shows that they have still managed to increase their margins on a range of key products.

In terms of our daily dealings with the banks, these are the meaty issues that determine how much we pay and what products we are sold.

However, the first challenge for the banks and IFSRA, the regulator, is to ride out the storm and restore some credibility to the financial sector.