It was "quite unlikely" that the domestic property bubble episode would have ended well even in the absence of the US crisis as a trigger, banking expert Peter Nyberg has said. In his opening address to the banking inquiry on its first day of public hearings, Mr Nyberg, author of Misjudging Risk: Causes of the Systemic Banking Crisis in Ireland, said it was unlikely the "soft landing" predicted would have been the outcome.

Before the crisis, he added, there were few signs that either the banks or the institutions were changing the way they were acting. “The assumption is . . . the work and behaviour would have continued as before until it became impossible and the crisis would have come for some other reason.”

Doubters and contrarians in banks and public authorities were “very few and had little effect on decisions”. Contrarians were ignored and “sometimes sanctioned”, he said. “They were not listened to and their views were not taken seriously.”

Mr Nyberg also said assigning the blame for the financial crisis primarily to lenders ignored the fact that a bad loan also implied that the borrower’s risk-assessment turned out to be wrong; responsibility for the crisis must be widely allocated.

He said the Irish crisis was essentially the result of the sudden deflation of a widespread domestic real estate bubble, but the “mania” was not a unique phenomenon and could be compared to recent developments in the US, Spain and Scandinavia. The triggering factor was a tightening of liquidity originating in the US.

“Many people had concrete joy from the bubble as long as it lasted; once the bubble burst these advantages were no longer available,” he said. “Everybody was believing the same thing and nobody saw that for which they were not looking. While the bubble was being blown, many people, not only the banks, had concrete benefits from it continuing.”

There appeared to be a global view that financial markets were “stable and efficient” and Irish private and public sector decision-makers adhered to the view, Mr Nyberg said.

This amounted to “group-think” and may partly explain the simultaneous occurrence of risky bank behaviour and passivity of public supervisors and central banks. Hundreds and hundreds of decisions contributed to the crisis, he said.

Mr Nyberg said the government decision to guarantee Irish banks, given on September 29th, 2008, was understandable, although he did not necessarily condone it. On that evening, the government was considering what should be done to avoid the collapse of banking the following morning.

“What one tends to do is to make the safe decision, even though afterwards it might not seem so wise,” he said. “The mistakes were really not made on the night; the mistakes were made several years before and not only by the government, but really by everyone else.”

Mr Nyberg also said the existence of regulation and supervision was not enough to hinder financial crises, as they had happened in the past. It was the lack of implementation of existing regulation and powers that was important.