The bank inquiry takes up its work by revisiting the final and most comprehensive of the investigations done to date, that undertaken by the banking commission chaired by former Finnish senior civil servant Peter Nyberg.

The commission laid out a detailed account of what went wrong in its 2011 report, saying responsibilty was widely shared by government, bankers, regulators, auditors and wider society.

Much of the groundwork for the banking inquiry has been done by Nyberg – the success or failure of the Oireachtas committee will depend on its ability to put flesh, and personalities, on the bones of what Nyberg has constructed.

Nyberg pointed to what went wrong – what we don’t know, in many cases, is who made the key decisions, and why.

In dealing with Nyberg, the banking inquiry will face one key frustration.

The commission of inquiry’s work was informed by 140 interviews it carried out with those centrally involved, though we do not know precisely who was interviewed and who was not.

However, because these were done on a confidential basis, the Oireachtas inquiry will not have access to them.

In fact, Nyberg himself has previously said he doubted whether any further inquiry could learn much more, as those who were interviewed were only so candid because of the confidentiality guarantee.

‘Speculative mania’

Much of the work of the banking inquiry will lie in trying to get the Nyberg interviewees to say the same thing in public as they did in private.

Nyberg examined what he called a “national speculative mania in Ireland during the period, centred on the property market”.

It is a story of widespread failure spurred by a belief that, at worst, the property market would head for a “soft landing” and not a catastrophic collapse.

The two key areas to be investigated in the hearing with Nyberg are:

1. The inflation of the bubble: The bones of the story are clear.

The banks had access to funding from the markets as well as their traditional depositor funding base and engaged in reckless lending and what Nyberg referred to as “shockingly large loans”.

Nyberg points out how the rest of the banks chased Anglo’s aggressive lending practices, in particular, in an attempt to win back share.

In doing this, the commission concluded some of the bigger banks were the worst offenders .

In some cases, it found, bank boards set loan growth and profit targets with little regard as to how this would work in practice or the attendant risks.

This provides clear leads for the inquiry as it frames information requests and questions for the banks and tries to discover who made what key decisions.

“It appears now, with hindsight, to be almost unbelievable that intelligent professionals in the banking sector appear not to have been aware of the size of the risks they were taking,” Nyberg wrote, but he concluded that this seemed to be the case.

Nyberg – and the scoping reports that went before his one, particularly by Central Bank governor Patrick Honohan – also pointed to failures of regulation by both the Central Bank, which was responsible for overall stability, and the Financial Regulator, which was meant to ensure the individual institutions remained on course.

Again, the role of the inquiry will be to ask those involved to account for this and for their continued inaction, even in cases – such as Irish Nationwide – where they had identified clear corporate governance problems.

Nyberg also looked at the role of the auditors, who did not see it as their job to blow the whistle with company boards or the regulator over increasing risk, if indeed, they realised such risk existed.

This will also feature in the bank inquiry’s work programme.

2. The lack of information: Nyberg points to the lack of information which government had as a key problem as the crunch decision to grant the bank guarantee was made.

Ministers were told the banks had a liquidity problem, but that they were not insolvent.

Had they understood conditions better, they may well have offered a more limited guarantee and possibly taken Anglo and Irish Nationwide into State ownership.

Even better, a recognition earlier of the scale of risks the banks were running could have led to a regulatory demand for them to raise more capital before the crisis hit, or – had such concern appeared earlier – to regulatory moves to limit lending over property through regulatory moves.

Nyberg’s report says by late 2005/early 2006, at the latest, alarm bells should have been ringing in the Department of Finance, the Central Bank and the Financial Regulator.

At that stage, house prices had gone up 40 per cent since 2002 and bank lending had doubled in the same period, with a huge growth in reliance on market funding.

Unheeded warnings

On Thursday, the day after Nyberg appears, the inquiry will hear from Canadian Rob Wright, who undertook a special study into the Department of Finance.

The study found the department did warn governments each year when the budget was being prepared, but these warnings were completely ignored.

The department should have shouted louder and more consistently, the Wright report concluded.

It also found the whole political and administrative system was driven by public expectations of tax cuts and spending hikes and by promises made in programmes for government and via the partnership process.

This is fruitful ground for the inquiry, as it prepares for the politicians and public servants to come.