AIB would have been at high risk of collapse if it was not guaranteed by the State, chief executive David Duffy told the Dáil's banking inquiry yesterday.

Mr Duffy, who took over as AIB chief in late 2011, said that some kind of guarantee needed to be enforced, and that there would have been a more “dramatic and severe outcome” without it.

The outgoing chief executive said letting one or two banks fall would have created a risk to this country, but it was impossible to predict the consequences.

Mr Duffy said he couldn’t say if AIB would have fallen without State support, but it would have been at huge risk.

“It was certainly going to suffer a big hit,” he said. “I don’t quite know what that would have meant.”

Worse than he thought

The chief executive said the institution was travelling at “200 miles an hour in the wrong direction” when he arrived and was in worse shape than he thought.

He said AIB was in disarray because there had been too many changes at senior level.

He described a degree of uncertainty in the institution because of leadership shifts and a fear among staff about individual roles.

“Clearly upon my arrival at the bank, there were concerns about the bank’s culture and governance,” Mr Duffy said.

“There was a need to rebuild trust between the bank, the taxpayers and its key stakeholders, including the Department of Finance and the Central Bank.

“Deficiencies had been identified within the group’s risk framework and the bank had a significant number of internally and externally imposed issues to work through as part of a risk mitigation programme.

“The customer model was highly challenged after a significant period of inward focus,” he said, “and there was limited organisational ability to help people in financial distress.”

The inquiry heard from Mr Duffy about his four years as chief executive at AIB, which received €20 billion in taxpayers’ funds.

He said he was confident that the State would be repaid all of the money it put into the bank.

Socialist TD Joe Higgins , a member of the committee, said Mr Duffy had no hand in the crisis, but asked if he was hired to achieve privatisation.

The chief executive said: “No, my role was to stabilise the bank and prevent it from collapsing, to make sure we could lend and support the Irish economy.”

Mr Duffy said 4,000 employees have left AIB since he took over and there has been a cut of €350 million in operating costs, of which €250 million came in salary reductions.

He told the committee this was “exceptional and staggering in terms of the scale” at the one institution.

Mr Duffy, who took a pay cut when he took office, said he was surprised at the high levels of salaries. “We addressed that,”he said.