Former financial regulator Patrick Neary has told the Oireachtas banking inquiry he had "bought into a system of regulation that didn't work" .

In his evidence to the committee on Thursday, Mr Neary said that, with hindsight, the supervisory measures taken by the Irish Financial Services Regulatory Authority (IFSRA) were not sufficient to meet the challenges posed by the crisis and the recession that emerged.

“I am deeply sorry about that,” he said. “I regret that very deeply.”

He was questioned about his time as chief executive of IFSRA between February 2006 and January 2009 by committee members including Fine Gael TD Kieran O'Donnell.

“It was a period where I bought into a system of regulation that didn’t work. The system failed and I regret that,” he said.

Mr Neary said that the IFSRA relied on the banks for analysis of risk management, believing them to be “best placed to know their own business”.

He was asked by committee chairman Ciarán Lynch of Labour if the fact that the banks were four times the size of the Irish economy had not been a matter of concern.

“The warnings that were coming from the Central Bank certainly did not create a concern that actions needed to be taken. They were benign and the conclusion was that we had a soft landing,” Mr Neary replied.

He said commentaries from other bodies such as the International Monetary Fund (IMF) and OECD backed up this view.

Professional

However, when accused of having an “extremely cosy” relationship with the banks by Socialist TD

Joe Higgins

, Mr Neary said he really did not know what that meant. He said there was dialogue and a professional relationship but he would not go any further than that to describe the relationship.

Mr Neary said he regretted not keeping a minute of an informal meeting he had with then Anglo Irish Bank chief executive David Drumm in September 2007, which he accepted had turned out to be very important.

Under questioning from Fianna Fáil finance spokesman Michael McGrath, he said Mr Drumm came to him suggesting there were rumours that businessman Seán Quinn was active in the CFD [contracts for difference market].

Mr Neary said he tried to make some inquiries but “nobody had anything hard and fast about Mr Quinn and his CFDs”. He said the facts were established on Good Friday in March 2008.

In January 2008, he met Mr Quinn, who volunteered that he had some CFDs.

“I took him to mean that whatever CFDs he had in financial stock, that he had converted it into a holding and shares,” Mr Neary said.

Golfballs

Labour Senator Susan O’Keeffe raised the production of golfballs featuring the logo of the financial regulator.

Mr Neary said when he became aware of the branded golf balls, meant to be used as promotional materials, they were discontinued.

“It was a mistake. There were a very small number of them purchased and it was discontinued very quickly,” he said.

“When it was unearthed it was discontinued. I regret that. It shouldn’t have happened.”

He was also questioned by Sinn Féin finance spokesman Pearse Doherty, who asked Mr Neary why he did nothing despite knowing Anglo and Irish Nationwide were lending to a very small number of individuals.

Mr Neary said he could not conceive of a situation where the regulator would intervene in a relationship between bankers and clients.

“It is inconceivable that the regulator can determine who or who doesn’t get a credit from a bank as a customer of that bank.”

Mr Doherty asked again: “Why did you do nothing?”