THE Department of Finance's most senior civil servant John Moran is being asked to explain correspondence between him and two controversial British billionaires.
It has also been revealed the department is withholding a series of files on its secret role in the battle between tycoons David and Frederick Barclay and businessman Paddy McKillen.
Mr McKillen claims the department was engaged in an inappropriate level of contact with representatives of British developers the Barclay brothers.
Mr McKillen and the brothers were involved in a struggle over the ownership of a group of luxury London hotels.
The Coalition was forced yesterday to defend the actions of Department of Finance secretary general John Moran.
Mr Moran discussed the Barclay brothers' efforts to buy the loans of Mr McKillen from the IBRC in a series of emails with representatives of the British tycoons.
In the emails, Mr Moran passes on queries about Mr McKillen's loans to other officials directly involved in dealing with the IBRC to decide what to do.
"In any event, I would mention that should you feel you are not making the right progress for whatever reason with the IBRC, they remain at your disposal (as of course do I if you are unable to reach them)," he said in an email to the Barclay brothers' representatives.
Finance Minister Michael Noonan is expected to respond today to growing demands to explain his officials' involvement in the affair.
Fianna Fail finance spokesman Michael McGrath says Mr Noonan has to make a specific statement on Mr Moran's correspondence regarding the "confidential banking affairs of a customer of a state-owned bank".
But it has also emerged that two-thirds of the documents relating to the contacts are not being released by the Department of Finance.
The department is claiming the papers contain "commercially sensitive information".
Junior finance minister Brian Hayes expressed "absolute" confidence in Mr Moran.
"I think he acted totally appropriately in that he passed this communication on to the relevant people in the department and, anyway, he made it clear in the communication that all decisions, commercial decisions, are decision for the IBRC and banks. It was the right thing to do.
"As far as the Government is concerned here, he acted appropriately," he added.
Mr Hayes said he was surprised to see the story appear in two newspapers on the same day, saying it said something about "inter-developer wars".
He rejected Mr McKillen's accusation and expressed full confidence in Mr Moran.
"I think he has been a breath of fresh air since coming into the department.
"I think he has done a very important job, particularly on the restructuring of the banking division," he said.
But Mr McGrath pointed to the inconsistency of the minister repeatedly saying the bailed-out banks were responsible for making commercial decisions on an independent basis -- and not subject to any influence from government.
"It is therefore difficult to understand why Mr Moran, as head of the department's banking unit in 2011, engaged himself in correspondence with a third party about the confidential banking affairs of a customer of a state-owned bank.
"This begs the question whether there is a special channel in the Department of Finance for certain individuals to have their grievances with the state-owned banks dealt with," he said.
Mr McKillen is demanding a full explanation from the Department of Finance.
A statement issued on behalf of Mr McKillen says the documentation suggests a "surprising level of co-operation between the Government and English competitors of Mr McKillen".
The statement said there was a "hostile stance" taken to Mr McKillen.
"Mr McKillen believes he is entitled to, and is seeking, full and complete disclosure of all communications of this nature," the statement said.
Mr Moran has been at the centre of a number of controversies since his appointment as secretary general last year, when he became the most senior civil servant to come from a predominantly private-sector background.
Cabinet ministers were angered last month by Mr Moran speaking of an "unnaturally low level of repossessions".
He also annoyed ministers recently by suggesting the ¿1bn proceeds from the promissory note earmarked for less budget cuts could end up being used to reduce borrowings.