Bonuses for bank middle management loan officers fuelled the banking crisis, Klaus Regling, the man in charge of Europe's bailout fund, has told the Banking Inquiry.
While bonuses were quite common for top executives, he added, it was unusual for loan officers to get them.
Mr Regling described a situation where these officers were dealing with so many loan applications that they had less time for proper credit analysis.
Trinity College Professor Philip Lane, in his address to the inquiry, said the Government should have put aside a "rainy day fund" at the height of the boom.
This fund could have been used to recapitalise the banks, fund a NAMA-type asset management agency and also provide supplementary resources for a budget in the event of a severe downturn, he added.
Mr Regling was of the opinion that the crisis in Ireland could have collapsed the euro.
The German economist also blamed the national "obsession" with buying property as a factor.
This was compounded by a shift in the tax base which became "increasingly dependent on the property sector".
The base shifted from stable sources to things such as capital gains tax, corporation tax, stamp duty on property and consumer taxes.
Internal procedures were overridden and banks were exposed to individual borrowers and property lending.