The former banking regulator has said "sorry" for his role in a crisis which led the country to the brink of bankruptcy.
Patrick Neary, who retired as chief executive of the Irish Financial Services Regulatory Authority in 2009, admitted the watchdog did not do enough to prevent the crash.
He said: "With hindsight, the supervisory measures taken by the authority were not sufficient to meet challenges posed by the crisis and the recession that emerged.
"I am deeply sorry about that."
Mr Neary, who was appointed chief of banking supervision in February 2006, was being cross-examined during a hearing for the parliamentary investigation into the causes of the economic collapse.
The ex-regulator retired with a 630,000 euro pay-off and an annual pension of 143,000 euro.
Before the inquiry, he said banking supervision under his watch was based on European standards, and benchmarks set out by the International Monetary Fund and the Organisation for Economic Co-operation and Development.
Mr Neary told TDs and senators on the inquiry that banks were run by experienced directors and had well-staffed risk management teams in the years leading up to the crash.
The watchdog trusted the lenders to do the right thing, he said.
"There was trust and reliance placed on the boards and management of the banks to conduct their affairs prudently and properly," he said.
"That was part of the model of supervision that was put in place by the authority."
He added: "That clearly failed."
The former regulator suggested the banks were to blame for what he called a lending crisis.
"Banks, I believe with hindsight, should have known what they were doing," he said.
Mr Neary described banking supervision at the time as a "principles-led approach".
But under cross-examination, the former watchdog admitted his authority had powers during the boom to stem the massive lending to property developers and house-buyers.
"I would never try to defend ourselves by saying we did not have the power," he told the hearing.
Mr Neary said he "could have found a way" to intervene.
"I think when push came to shove the regulator, if it had set a hard, well-defined limit (on lending), I think we would have been able to bring some control on to the situation," he said.
There were rules at the time on the scale of bank lending but there was "a lot of trouble with the interpretation" of that regulation, he added.
Mr Neary said he had a "heightened awareness" of the surge in mortgages during the property splurge and that he now believes the banks lent too much.
But he denied the regulator was reckless in allowing the lenders to act as they did.
"The authority placed itself, unfortunately, so as it could be viewed as a service provider rather than a detached strong regulator," he said.
Mr Neary added: "I think very few people would dispute the style of regulation the authority adopted did not address the situation that pertained in Ireland during the period before the crisis.
"I think few people would dispute a far more intrusive form of regulation was required."
Asked to sum up his time in charge of banking oversight in Ireland, Mr Neary said: "It was a period where I bought into a system of regulation that didn't work - the system failed and I regret that."
The ex-regulator said the system operated on "constructive ambiguity" which meant the watchdog was "opaque" or "didn't show your hand" to the financial institutions it was supposed to be regulating.
"Essentially that is what that model of principles-led regulation left us with ... it had to be done in cooperation with control elements within the banks," he told the inquiry.
"The argument would be made they were best placed to assess the risks."
Throughout his sworn testimony, Mr Neary repeatedly referred the inquiry back to Basel, international banking guidelines issued by the Switzerland-based Basel Committee on Banking Supervision.
Light-touch regulation then favoured by the organisation was widely-used internationally at the time, he said.
"I believed in that system," he said.
"I misjudged the risk and it resulted in the situation where we found ourselves.
"At the end of the day, all I can do is express my regret for that."
Pressed about his retirement pay-off and pension, Mr Neary said it was agreed by the regulator he headed up, and was in line with civil service guidelines at the time.
"I don't have any more to say on the matter." he added.