Former financial regulator Patrick Neary has told the inquiry investigating the stewardship of the now defunct Irish Nationwide Building Society he had had no issues with its lending policies in July 2007.
Mr Neary was cross-examined at the inquiry today by INBS's former managing director Michael Fingleton.
He told Mr Fingleton, who is representing himself at the inquiry, that he "can't recall any issues" being raised with him over asset quality at INBS, but "that is not to say they didn't exist".
Mr Fingleton pointed out that at that time the financial regulator even allowed the building society to increase its loan-to-deposit ratio.
Mr Neary said this was done so as not to disadvantage INBS and to encourage the institution to be active in the lending market.
When asked by the former head of INBS if this suggested the regulator did not have issues with the society's lending at the time, Mr Neary said "I'll accept that Mr Fingleton".
Mr Neary added that in the middle of 2007 there was "never any question" the building society was in breach of lending rules and there was no dialogue about restricting its lending.
Mr Fingleton also said some communications from the regulator made "recommendations" rather than statutory orders in the run-up to the financial crisis.
He noted that certain letters from the regulator to INBS about its handling of credit reviews in 2006/2007 contained no legal provision and suggested letters from the Central Bank around that time were issued under low or medium priority.
Perception Fingleton was 'dominant individual'
The former financial regulator also told the inquiry there was a perception "out there" that Mr Fingleton was a "dominant individual" at Irish Nationwide and that he told people in the building society what to do and was never challenged on it.
Mr Neary said the perception was first raised by the Central Bank in the 1990s, and suggested that as the society grew what Mr Fingleton "said went".
He added this perception was not the driving force in any regulatory dealings with INBS, rather it was more related to the growth of the institution in the area of commercial lending.
Yesterday Mr Neary told the inquiry that Irish Nationwide avoided strict regulatory measures in 2008 due to fears they could impact a potential sale of the lender.
He said the financial watchdog did not act upon signs of poor governance at Irish Nationwide in the lead-up to its collapse into State ownership in 2010.
Addressing the inquiry before Christmas, the former managing director of the now defunct building society described the current inquiry as an "artificially trumped up case" to deflect attention from the Department of Finance and the Central Bank.
Mr Fingleton said both the regulator and, previously, the financial regulator had full details and knowledge of the activity of INBS at all times, including its commercial lending programme.
Irish Nationwide cost the taxpayer over €5.4 billion after it collapsed during the financial crisis.
The public hearings are into alleged breaches of the Central Bank Act by five key figures at the former financial institution, including Mr Fingleton.
The other accused are former company secretary Stan Purcell, former head of commercial lending Tom McMenamin, and William Garfield McCollum, who headed Irish Nationwide's UK lending.
Former chairman of the building society Michael P Walsh admitted participation in "certain prescribed contraventions of financial services law" and was fined €20,000 by the Central Bank.
Mr Walsh has been disqualified from managing a regulated financial service provider for three years and also received a reprimand from the Central Bank.
The Central Bank said the settlement with Mr Walsh concluded its inquiry against him.
The inquiry resumes on Monday 21 May.