Allied Irish Banks feared that any legal action or confrontation with the then Taoiseach, Mr Charles Haughey, would have caused "great resentment towards the bank", a former senior bank official told the tribunal.
There was a concern that there would be "repercussions for the bank's general business throughout the country" and there might have been a flight of customers, according to former regional manager for Dublin West, Mr Michael Kennedy.
In reaching the settlement on Mr Haughey's debt, the bank had taken into account Mr Haughey's position, along with other factors.
Mr Kennedy also accepted that a sum of £100,000 owed by Mr Haughey and kept in a ledger at the AIB head office was effectively "an interest-free loan".
Although AIB agreed to allow this outstanding debt to remain interest free over an unspecified time, Mr Haughey never repaid the money, confirmed Mr Kennedy.
Giving evidence about some of the events leading to the settlement of Mr Haughey's debt, Mr Kennedy said he attended a meeting with the branch manager, Mr Michael Phelan, and Mr Des Traynor at the Dame Street branch on December 17th, 1979.
During the meeting, Mr Traynor indicated that a payment of £600,000 could be provided by Guinness Mahon against the deeds of Mr Haughey's Abbeville home on the condition that the bank accepted this as a final settlement of Mr Haughey's debts.
When Mr Traynor was told this was "out of the question", he said the bank could either accept this as full settlement or simply leave the debt outstanding.
There were to be "no rabbits pulled out of hats or blood to be got out of turnips," said Mr Traynor.
Mr Phelan informed Mr Traynor that if Mr Haughey's debt was reduced to £200,000, the bank could write off the remainder. This was the maximum amount the bank could write off, as a higher amount would be investigated by the bank's auditors, Mr Kennedy said.
The meeting concluded on the basis that Mr Traynor would convey the bank's view to Mr Haughey later that week and report back to Mr Phelan.
However, Mr Traynor told the bank officials he was "far from optimistic about Mr Haughey's reaction" to this proposal, according to Mr Kennedy.
The tribunal also heard that Mr Kennedy was contacted by the bank's deputy chief executive, Mr Patrick O'Keeffe, on January 17th, 1980, who told him of the terms which had been arrived at regarding a settlement with Mr Haughey.
Mr Kennedy was asked to prepare a letter setting out these terms and the letter would include blank spaces which Mr O'Keeffe would complete prior to signing.
The debit balance was agreed by the bank at £860,001.17 and £750,000 of this was repaid by Guinness Mahon in three separate bank drafts in return for an agreement to return the main item of security.
The balance of £110,000 was allowed to out-stand against the remaining item of security on the understanding that it would be repaid by Mr Haughey in due course, Mr Kennedy confirmed.
When the transactions had been completed, a sum of £55,579.36 was transferred to the Dame Street branch, to be taken into the bank's profits.
Mr Kennedy had informed the tribunal it was clear from this that "only a crude interest which had been suspended and not taken into profit was written off and not the principal".
In a supplemental statement, Mr Kennedy said that from a review of the files Mr Haughey's indebtedness on December 31st, 1979, stood at £1,079,111.17.
Of this, £391,146.63 represented "suspense interest", which was covered by a credit to a suspense interest account of that amount.
On January 17th, 1980, these balances were transferred from the branch to head office, Mr Kennedy confirmed.
To the debit balance of the control account, there were applied three payments from Guinness Mahon - one of £600,000, another of £100,000 and a third draft for £50,000.
A sum of £219,111.17 was transferred from the suspense interest account to the credit of the remaining indebtedness on February 20th, 1980. The indebtedness then remaining was £110,000.
On February 22nd, 1980, a sum of £6,456.10 was paid to the Dame Street branch from the suspense interest account. This was in respect of farm wages at Abbeville, Mr Kennedy confirmed.
A sum of £55,579.36 was then taken into the profits of the bank at the Dame Street branch. This left a remaining debt on the suspense interest account of £110,000.
Mr John Coughlan SC, counsel for the tribunal, put it to Mr Kennedy that Mr Haughey was effectively being offered "an interest-free loan".
"Yes, it was an amount allowed to out-stand as part of a repayment arrangement," replied Mr Kennedy.
"An interest-free loan in common man's language, am I right?" asked Mr Coughlan.
"If you wish to so describe it," said Mr Kennedy.
"Am I right? Am I right? An interest-free loan?" persisted Mr Coughlan.
"Yes" replied Mr Kennedy.
"Which, on the information available to the tribunal as of this date, has never been repaid, is that correct?" said Mr Coughlan.
"So you inform me, yes," said Mr Kennedy.
Mr Coughlan put it to Mr Kennedy that through the 1980s and 1990s, if this sum of money had never been repaid, there had been an interest-free loan on the bank's books.
Mr Kennedy said Mr Phelan's letter to Mr Haughey had made this clear the debt was free of interest.
In the accounts of the bank itself, as distinct from the account of the customer, the remaining debt of £110,000 was covered by the credit in the suspense interest account.
The £110,000 was to remain interest free on the head office ledger of the bank at Bank-Centre, Ballsbridge, Dublin, according to the letter of settlement.
It was also made clear that the indebtedness was being taken off the books at Dame Street.
The bank continued to hold the security in respect of Mr Haughey's island, Inishvickillane, and a property in Co Sligo in respect of the outstanding £110,00, Mr Kennedy confirmed.
Asked why this was done, Mr Kennedy said he could only speculate that this was to ensure confidentiality.
Mr Coughlan suggested that the impression given was that Mr Haughey's account at Dame Street had been cleared.
Mr Kennedy replied that this could be the case but it would have been far clearer if the whole £391,000 had come back.