Central Bank Governor Patrick Honohan has told the banking inquiry that he found the terms of the bailout programme unsatisfactory.

However, he said he advised the government to accept the programme as the alternative would have been more economically damaging.

Professor Honohan took issue with its high interest rates and lack of an insurance mechanism against tail risks in the banks.

However, he said that if it did not deliver a sustainable debt path, he believed it could be renegotiated.

Without the bailout, the spending and tax adjustments would have been much more severe, he said.

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Mr Honohan said he confirmed the bailout on RTÉ’s Morning Ireland in an attempt to restore confidence after €900m in deposits left Irish banks in one day, the largest ever daily outflow.

He did the radio interview on 18 November 2010 as convincing reassurance was needed and the start of negotiations provided that.

It was clear to him earlier that month on 4 November, that an application for a programme could no longer safely be deferred.

The Minister agreed to exploratory discussions with Troika officials in Brussels.

Mr Honohan said that there was a sense of growing panic in the days before the bailout and he went on Morning Ireland to tell the country that things were under control.

He said the IMF were coming, they had lots of money and they would protect us. €900 million in deposits had left Irish banks the day before.

The political dimension was not on his mind, he said.

He was concerned about the credibility of the Central Bank in protecting the system.

He did not tell the then Taoiseach Brian Cowen or then Finance Minister Brian Lenihan beforehand and did not think he should have done.

He said he only confirmed that discussions were going on, he did not describe them as negotiations.

Asked if he undermined the government, he said no, it created a good atmosphere and did not ramp up "asks."

He said he advised ECB head Jean Claude Trichet not to send the letter of 19 November threatening to withdraw support for Irish banks.

He told him it was a bad idea, and it would look like an ultimatum.

Mr Honohan said the banks were solvent at the time of the bailout and therefore did still qualify for emergency liquidity assistance from the ECB.

The bailout was necessary and helped Ireland through a difficult years of 2011 and 2012 by offering guaranteeing funding at low interest rates.

On burning bondholders, the Troika told Mr Lenihan there would be no programme if that happened.

Full negotiations on a programme began in Dublin on 18 November.

These meetings took place in an increasingly tense situation of national and international media speculation, market tensions and considerable international official alarm at the highest levels.

Faced with the funding cliff in late 2010, he considered but rejected revoking the guarantee and bailing in bondholders and potentially some large depositors.

But it was too risky and it was doubtful the ECB would agree.

He suggested to Mr Lenihan on 10 April 2010 that Ireland could be next for a bailout.

The Minister replied that the talk in Brussels was that Portugal would be next.

In May 2010, he got a call from Ashoka Mody of the IMF asking if Ireland would be interested in a precautionary line of credit.

He thought it was worth exploring but Merrion Street ruled it out.

In July, Central Bank officials told him the fiscal situation very bad but he had concerns that the Department of Finance did not share that view.

He told Mr Lenihan in August that Ireland's debt ratio heading for 100%.

In September, Mr Trichet called Mr Lenihan to ask what he was going to do about Ireland's worsening situation.

Mr Honohan said he did not find it significant that on the night of the guarantee the National Treasury Management Agency was not consulted as the top two officials were out of the country at the time. He said he did not find it sinister at all.

Asked about that value should be place on external reports when domestic forces can influence them, Mr Honohan said years ago OECD reports had the reputation of being negotiated but he said the IMF were not a push over.

He said they welcomed clarification of fact to a draft, but would not be pushed around on their policy recommendations.

He said the Central Bank would have liked to have the power to remove people from banks, but the legal advice was that this would not be constitutional.

Mr Honohan said if a crisis arose the Government could remove the CEO of a bank by going to the High Court.

He said the Central Bank had the power to publish the names of banks found to be in breach of the revised code of conduct on mortgage arrears, but chose not to do so.

He said they might fine and name the banks found to be in violation. Over all he said there were deficiencies but the banks "are largely coming up to the plate."

Asked if Ireland could have avoided the bailout if NAMA had not been established and the haircuts weren't as severe as they were, Mr Honohan said the true value of the loans would have been outed eventually.

He said there is an openness of communication now and he doubted that if there were concerns about a bank being in trouble that he would not hear of it.

Asked if crony capitalism adequately describes relations during the bubble, Mr Honohan said it was a pejorative term and was deserved in the cases of some banks.

He said it did not believe the banks had been over-capitalised, but agreed they could make better use of their capitalisation when dealing with loan arrears.

Asked how the burden of the crisis fell socially, Mr Honohan said certain age groups had lost badly and a broad swathe of society had been effected but he agreed that the poor had done worse.

Professor Honohan was asked how Ireland's regulatory regime and procedures for banking compared internationally.

He said Ireland was constantly being assessed and reviewed against best practice, but there was nothing to compare with common sense and making sure that you understand what you know and what you do not know.

Professor Honohan said he believed Ireland was moving to a more open environment.

On the subject of NAMA purchases - Mr Honohan said if they'd paid €10bn less, then the State would have had to pay the remainder from other sources.

Labour Senator Susan O'Keeffe asked Mr Honohan how it would have been possible for any member of the Government to disagree with his comments on RTÉ's Morning Ireland programme in November 2010 regarding the likelihood of Ireland applying to the troika for a bailout.

Mr Honohan said it would have been very easy for the Government to disagree if they had wanted to but they did not want to.

He said they wanted to have a bailout programme and the whole machinery was moving in that direction.

Senator O'Keefe asked Mr Honohan if he accepted that he had copperfastened the fact that there was going to be a loan that morning.

Mr Honohan said it had already been copperfastened. He said it was a “done deal”.

He said the Government could have pulled out of it but the whole momentum was moving in that direction.

Fianna Fáil Senator Marc McSharry asked about the reaction from the European Central Bank to Mr Honohan's comments on RTÉ that morning.

Mr Honohan said there had been a sense among his colleagues in the ECB that everything would be alright now, and he was not very comfortable about that.

He said he had done the interview for the stability of Ireland and for reassuring people in Ireland, not to appease some people around the table.

He said in this case the interests of the ECB and the interests of Ireland were aligned and they were not always aligned.

Mr Honohan said if the Government had managed to get the ECB on board with burning the bondholders then they should have done that.

However he said doing it against the views of the ECB would have cost more than the gain from burning bondholders.

Mr Honohan was responding to questions from Sinn Fein's Finance spokesperson Pearse Doherty.

Deputy Doherty asked Mr Honohan about the stress tests carried out on Irish banks by BlackRock Solutions in relation to predictions on residential mortgage losses.

Mr Honohan said the BlackRock model assumed there would be a lot of actual losses incurred in a short period of time, because they were applying a model that worked in the US.

Mr Honohan said what had happened since then is that the actual rate of arrears increased faster than BlackRock predicted but the rate of losses had been much slower.

He said those losses will be incurred they will just have happened later and later.

Fine Gael TD Kieran O'Donnell asked Mr Honohan about his interview on RTE's Morning Ireland in November 2010.

Mr Honohan acknowledged the key reason for his speaking out was that he was worried about a run on the banks.

Mr Honohan said he also wanted to create the sense that it was ok, that things were under control and we were going to get this back.

Mr O'Donnell asked Mr Honohan if there was anything he would have done differently looking back on his tenure as Central Bank Governor.

Mr Honohan said the first stress test in March 2010 wasn't done as effectively as he would have liked.

He said the consequences weren't very severe, but he said it was a type of mistake which he knew could be made, and he made it.

He said he believed there were things he would have done slightly differently which were tactical but not strategic errors.

He said he did not think he had set things in the wrong direction.