By Padraic Halpin
DUBLIN (Reuters) - Former Allied Irish Banks (I:ALBK)(AIB) boss Eugene Sheehy said his failures while at the helm of the now state-owned lender during the financial crisis are a "matter of eternal shame".
Irish lawmakers are questioning former bank executives, government ministers and officials as part of a parliamentary inquiry into the country's banking crisis, seven years after it took hold and led to the most expensive state bailout in the euro zone.
During a 38-year career at the bank, Sheehy led AIB from 2005 until his retirement in 2009, shortly after it received its first chunk of state funds. AIB's rescue eventually cost taxpayers 21 billion euros (£15.02 billion), the most given to any Irish bank still open.
"I would like to express my deep personal regret for my role in what occurred. I am keenly aware of the damage caused and this fact occupies my thoughts on a daily basis," the bank's former chief executive told the inquiry.
"We took too much risk in a sector that turned out to be toxic. I was CEO, I could have stopped it," Sheehy added, referring to its lending to property developers.
"That I failed in that responsibility is a matter of eternal shame."
One of the key parts of the inquiry as it enters its most politically sensitive stage is the detail around the blanket guarantee on all bank liabilities issued by the government in 2008, effectively tying its fate to the financial sector.
Sheehy confirmed earlier evidence from former AIB Chairman Dermot Gleeson that AIB and Bank of Ireland (I:BKIR) recommended a guarantee that would not have included Irish Nationwide (INBS) and Anglo Irish Bank. INBS and Anglo were included and subsequently accounted for more than half of the 64 billion euro state rescue before being liquidated.
AIB reluctantly agreed to lend Anglo 5 billion euros to stop it from defaulting, Sheehy said, adding that it did so under the premise that its rival "was to be taken down (liquidated)".
"When we saw the guarantee document for the first time later that morning we could not understand why Anglo and INBS were included," Sheehy said.
That evidence puts the spotlight on Brian Cowen, who was Prime Minister at the time the guarantee was made and who is due to appear at the inquiry before findings are presented in November.
His appearance will provide an opportunity for lawmakers and members of Sinn Fein, the country's most popular opposition party, to rehash old controversies and berate Cowen's Fianna Fail party, which is seeking a return to government next year after presiding over the crisis.