The chairman of Ireland’s financial regulator signalled that the “light touch” era was at an end in the wake of an €87 million loan scandal which forced the resignation of two of Anglo Irish Bank’s top directors.

The regulator's chairman, Jim Farrell, said that a more intensive form of regulation was required and that a plan was being worked on.

His comments followed the announcement last Friday by Patrick Neary, the Financial Regulator, that he was bringing his retirement date forward to the end of this month.

Mr Neary’s position became untenable, according to economists and financial commentators, last month when Sean FitzPatrick, chairman of Anglo Irish, announced his departure after admitting to transferring €87 million worth of loans annually for eight consecutive years to another financial institution in order to hide them from shareholders.

Mr FitzPatrick insisted that he had done nothing illegal but admitted that his behaviour was “inappropriate”.

In his announcement, Mr Neary said he had been unaware of the loans until being informed of them by Brian Lenihan, the finance minister, when the government was drawing up its €440 billion state guarantee for six Irish financial institutions, including Anglo Irish.

‘‘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 e-mail escalation of these issues to me or to the authority over the period until the matter was raised with me by the [finance]minister on December 10, 2008,” Mr Neary said.

Mr Farrell said: "The behaviour of people operating at the top of our financial institutions must be fully appropriate to their responsible positions.

"Some of the behaviour we have witnessed of late is totally unacceptable,” he told a parliamentary committee. "A more intensive form of regulation is required."

ISME, the lobby group for small businesses, urged the government to sack the Financial Services Regulatory Authority board.

It claimed the authority was guilty of "gross incompetence" in its dealings with the banking sector. ISME boss Mark Fielding accused the regulator of being too trusting of the banks.

"Surely the role of the regulatory authority is to be the watchdog and, some would say, bloodhound of the financial services sector, rather than the lapdog of unscrupulous, careless and reckless bankers.”

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