A liquidity problem of €4bn at Irish Nationwide bank was known a full three weeks before the night of the bank guarantee, it has emerged.

Bank of Ireland boss Richie Boucher told the Banking Inquiry he was "shocked and shaken" when the problems at Irish Nationwide bank were revealed to him at a meeting on September 7, 2008. The group chief executive described how his bank was called to the meeting where Financial Regulator Michael Neary was present, along with Irish Nationwide representatives.

He described how "pieces of paper were being flown, thrown around" and there was no "coherent" position on the liquidity problem at Irish Nationwide that they were being asked to solve.

Mr Boucher said they "fed back" to the financial regulator that they did not believe what was discussed was an accurate picture of what was needed - but even if it was, they were not in a position to provide it. Earlier, Mr Boucher told the inquiry he had been annoyed by rumours among his competitors that Bank of Ireland had sought a guarantee for itself. It did not need one, but might have, if turbulent market conditions continued.

Mr Boucher understood clearly there would be a "systemic guarantee" of six banks, a view at odds with that of former AIB chairman Dermot Gleeson, who had believed only four banks would be covered.

Mr Boucher told the hearing that his bank board "made strategic mistakes and errors of judgment and I bear collective responsibility for these and my contribution to them".

Mr Boucher agreed that 100pc mortgages given by the bank were wrong and trackers were also "a very big mistake".

He also defended his salary of €843,000, adding it was approved by the Minister for Finance and voted on by the shareholders.

Joe Higgins TD asked him about the personal letter of support for developer Sean Dunne's proposals for the Jurys/Berkeley Court site, which he sent to Dublin City Council in 2007. Mr Boucher said it was also "one of the many stupid things I have done".

Mortgages

Solicitor Brian O'Donnell, who recently handed back the keys of his Gorse Hill home in Killiney, sat in the public gallery with Gerry Beades of the New Land League.

Ulster Bank's former group chief executive and director Cormac McCarthy was asked about 100pc mortgages by Senator Sean Barrett. They lent €1bn worth to 4,000 customers between 2004-08 and "the regulator did not object to our launching the product".

They had introduced the product because they were losing share in the first-time buyers' market, but "I do regret that we did it".

Finance Minister Brian Lenihan attended a launch by Ulster Bank the day after the guarantee. Mr McCarthy told him they were already seeing deposits leaving Ulster Bank that day because it was not covered by the guarantee.

Irish Independent