Financial Regulator Patrick Neary has announced his decision to retire on 31 January.

The development follows a report into the handling of an investigation into secret loans to directors at Anglo Irish Bank.

A report found there had been a communications break down in the organisation, which resulted in a lack of action by the regulator's office.

It emerged last month that Anglo Irish Bank Chairman Sean FitzPatrick had been hiding loans worth €87m from public view.

Mr Neary said: 'I am proud of my distinguished career spanning almost 40 years as a public servant who acted at all times in the public interest and it was a great honour for me to serve as Chief Executive of the Financial Regulator.

'In taking my decision to retire now, I am conscious of the need to uphold the good standing of the Regulator and public confidence in it, especially at a time of great financial turbulence which is challenging all regulators worldwide.

'I had deferred a decision about my retirement until the Report of the Committee of the Authority examining the internal communication of matters relating to loans to Directors of Anglo Irish Bank Corporation plc was concluded.

'So far as I am concerned, I was not advised of any such matters in early 2008 and there has been no oral, written or email escalation of these issues to me or to the Authority over the period until the matter was raised with me by the Minister on 10 December 2008.'

The Irish Financial Services Regulatory Authority had been aware of the issue earlier last year. However, the Department of Finance was only informed in late December.

That time gap caused anger in political circles in light of the Government guarantee covering Anglo and other banks in September.

Fine Gael spokesperson on finance Richard Bruton said: 'The failure of the banking regulatory regime exposed in recent weeks and months made this resignation inevitable.

'It remains to be investigated why the practises identified in Anglo were not reported up the line and acted upon.

'This resignation tonight may be the first tangible signal that the people in Irish banking, both at a commercial and regulatory level, that brought our banking system to this low ebb will not and can not be the people that bring us out of this mess.'