TERMS OF REFERENCE for a statutory commission of inquiry into the banking system will be decided on the basis of two preliminary reports from the governor of the Central Bank and an independent “wise” man or woman, according to Minister for Finance Brian Lenihan.

Outlining details of the Government’s proposed investigation into the “systemic” failures of the Irish banking system, Mr Lenihan said the inquiry would be established in June and completed within six months.

But the Opposition condemned it as a “whitewash” and claimed the banks, developers and Fianna Fáil were a “toxic triangle” that led to Ireland’s financial “ruin”.

Introducing a Dáil debate on the inquiry, Mr Lenihan said “the Government will immediately commission two separate reports – one from the governor of the Central Bank on the performance of the functions of the Central Bank and the Financial Regulator”.

The second report would be from “an independent ‘wise’ man or woman with relevant expertise to conduct a preliminary investigation into the recent crisis in our banking system and to inform the future management and regulation of the sector”.

After this the statutory commission would be established and chaired “by a recognised expert or experts of high standing and reputation. The terms of reference for this commission will be informed by the conclusions of the two preliminary reports”, the Minister said.

Mr Lenihan told the House that “the commission of investigation will examine and report on the causes of the systemic failures such as corporate strategy, governance and risk management in the Irish banking sector”.

That examination should include “the performance of individual banks and bank directors where wrongdoing and lax practices have contributed considerably to the crisis; the performance and structure of the banking system generally; the performance of the regulatory and Central Bank systems; and the response of the relevant Government departments and agencies, including the linkage between the banking crisis and overall economic management.” Afterwards it would be open to an Oireachtas committee to hold public hearings on the report.

Former Fine Gael leader Michael Noonan said Ireland’s crisis happened two weeks after the US. “They’re nearly through it and we’re wondering about an inquiry.” Lehman Brothers collapsed in the US on September 15th, 2008 and two weeks later the Irish banking system was in trouble. The US moved so rapidly that the recapitalised banks “have actually paid back what they were given and were now trading properly” and more than 40 US bankers were in jail.

He stressed “the public feels a need for a public catharsis and that’s not going to happen with an inquiry behind closed doors”.

Labour finance spokeswoman Joan Burton claimed the Government’s proposal was a “clever sidelining of the issue until the far shores of the aftermath of the next general election are reached”. Ms Burton added: “Anglo [Irish Bank] supplied the developers and the developers were the funders to Fianna Fáil and in that circle of self-regard, in that toxic triangle, in that golden triangle, there’s where the ruin of our system lay”.

Sinn Féin finance spokesman Arthur Morgan said “this proposal from the Government is a whitewash before it even starts”. Asking who would be appointed to the commission, he said it would be hand-picked by Government “and we are expected to believe that they will be independent”.