The European Central Bank explicitly threatened the government in March 2011 it would withdraw emergency support for Ireland's banks if losses were imposed on senior bondholders, the Oireachtas banking inquiry has found.

The sharply worded criticism heads the final report of the cross-party committee, tasked with investigating the cause of the economic crash, which will be published in full on Wednesday.

Meanwhile, it finds that the then attorney general, Paul Gallagher, explored the possibility of burden-sharing with senior bondholders, with legal assistance from the International Monetary Fund, in November 2010.

However, it confirms a troika programme involving the ECB, IMF and the European Union could not have been agreed if the government had targeted senior bondholders.

The inquiry finds that the ECB’s refusal to allow Ireland to force losses upon bondholders led to Irish citizens taking on “inappropriate” and significant banking debts.

The 375-page report is highly critical of the financial regulator, Central Bank, European Central Bank and the Fianna Fáil-led government.

Criticism

However, it reserves the most significant criticism for the ECB and finds it also threatened Ireland on November 19th, 2010 that it would discontinue its emergency liquidity assistance funding for banks if the State did not enter a bailout programme. Nine days later Ireland formally entered a bailout programme with the ECB, IMF and European Commission. The report will find that the bailout was inevitable from October 2010.

The committee will also confirm that the Fianna Fáil-led government was assured by the Central Bank and the financial regulator that all six institutions were solvent on September 29th, 2008, the night the bank guarantee was agreed – and that those who decided on the blanket guarantee did not have adequate information available to them.

The report will find that the ECB made it clear no bank was allowed to fail, and that there would be no European-wide initiative to underpin the sector.

The inquiry will confirm that the Central Bank had sufficient measures to ensure the banks would have opened the following morning if a guarantee had not been put in place.

Default

This will move to dispel the argument that Anglo Irish Bank would have defaulted had a guarantee not been agreed.

The committee will find that the then-governor of the Central Bank, John Hurley, argued strongly that a guarantee was necessary.

The report is also highly critical of the financial regulator. It had sufficient powers to regulate, including the authority to revoke banking licences, but the powers were simply not used.

The report will conclude that banks were allowed to breach lending limits on property without fear of any consequence because of the regulator’s inaction.

It will find that the failure of banks was the direct responsibility of their senior managers and boards of directors, and their collapse was brought about by an overreliance on market funding and the continued introduction of new mortgage products – which also had the effect of masking the underlying problems in the construction and housing sectors.

It will also find that their collapse was not the result of any single decision, but instead the cumulative effect of multiple events and decisions.

The final report will be debated this evening and tomorrow, paving the way for the Taoiseach to dissolve the House next week.