Advice did not warn banks would 'burn through' capital, PAC told

The most senior civil servant at the Department of Finance has said the department knew of some of the difficulties at Anglo Irish Bank two years ago, but did not know their full scale.

Kevin Cardiff, who is secretary general in the department, said preparations from early 2007 until the months before the bank guarantee in September 2008 did not focus on solvency because the advice was that there was not an issue in that area.

Mr Cardiff is appearing before the Dáil's Public Accounts Committee which is investigating the €500bn guarantee of domestic financial institutions.

He said: "There wasn't a picture available to us at that moment…that any of the institutions was likely to have such difficulty as to burn through its capital (due to its losses)."