Ireland's Central Bank snubbed warnings from a top figure in the country's leading economic think-tank eight years ago about the dangerous scale of loans to speculators and developers, an inquiry has heard.
Around two years before the economic crash, Professor John FitzGerald of the Economic and Social Research Institute (ESRI), said he became aware of "a lot of Irish investors" looking to buy up property in Poland.
The economist had been tipped off by the then Irish ambassador to Warsaw about the spending spree during a trip there in 2006 and contacted the Financial Regulator on his return home, he told the Oireachtas Banking Inquiry.
"My concern was that [speculators] would have borrowed large sums of money from Irish banks, gone to Poland, then using that as equity leveraged that again," he said.
"My concern was that one Irish bank in particular had a major bank in Poland and that Ireland could be exposed unduly through this form of investment.
"So I wrote to the regulator about that."
Allied Irish Bank, which has since been taken over by the State, sold its 70% share in Poland's Bank Zachodni in 2010.
Under cross-examination from TDs and senators, Mr FitzGerald said he again contacted the Central Bank the following year over his worries about the vigour of stress tests on Irish banks.
The professor, who had responsibility for influential economic forecasts from the part publicly-funded institute, was working with banks in spring 2007 on tests designed to assess their ability to withstand financial shocks.
"I was concerned that the stress tests being undertaken by the Central Bank were not onerous enough; that they were looking at falling house prices but not taking account of the fact that a lot other things would happen at the same time," he told the hearing.
"They were not using a model to do this so I contacted the Central Bank about my concerns in that regard in 2007."
Asked if he got a satisfactory reply from the regulator on both occasions, Prof FitzGerald responded: "No"
At the time, Patrick Neary was the chief executive of Dublin's Financial Regulator.
He retired in January 2009 after a damning report into his handling of secret loans to directors at former rogue lender Anglo Irish Bank.
The banking inquiry, which is investigating the events which led up to the banking crash, is expected to publish its findings later this year.
Turning to his own role in forecasting the crisis, Prof FitzGerald said the ESRI made a serious mistake by not looking at the books of Ireland's main lenders.
In May 2008, the think-tank, which was set up to inform Government policy, declared the fundamentals of the country's economy were sound.
Prof FitzGerald, now a member of the commission on the Central Bank, said he did not support the statement today.
"The financial sector was obviously, patently unsound," he said.
"Not seeing the unsound nature of the financial sector was a bad mistake."
The economist said they had relied on international reports on global economic health, which did not predict a financial meltdown, but he admitted it would be a "cop out" to blame other organisations.
"We should have seen the problem," he said.
"We were conscious of the fact that there was a problem out there, but we made a call that Ireland would probably escape it and we were totally wrong."
But if the Government had heeded repeated ESRI warnings about the dangers of the property bubble from 2001 onwards, Ireland would have escaped much of the damage suffered since the crash, he said.
Prof FitzGerald admitted one report from the institute in 1999 had been changed after a "nervous Nelly" from the Department of Finance contacted them "jumping up and down" to complain about its reported contents.
This was unusual and done in his absence despite his insistence over the telephone from overseas that the official was being political and should be ignored, he said.
"My decision was that it should not be amended. When I came back, I found that it had been amended," he told the hearing.
The omitted details were later published in a newspaper, he added.