AIB's former banking chief executive has talked frankly for the first time about being at the centre of the financial and economic storm, describing the country as being "on steroids" during the boom.

Eugene Sheehy, who left Ireland's biggest bank last September, has spoken about the controversial events of recent years, about the wreckage of the banking system and his thoughts on the roles played by banks and the government in the crisis. He also talked openly about the appointment of an insider as his successor and the key late-night meeting when the government agreed to guarantee the €440bn of deposits and bond debt in the Dublin banks.

He told friends he turned down unsolicited work offers, including a job in cash-rich Bahrain, and intends to stay in Ireland.

If invited, it is understood he will talk frankly to the proposed banking inquiry even though the government plans to have it stop short of probing the meeting of 29 September 2008 in Government Buildings.

He is said to recall the meeting as a "fairly collegiate" gathering.

But his account may conflict with other accounts because he told friends that the possibility of letting Anglo Irish collapse was never once mentioned during the meeting between the top four bankers from AIB and Bank of Ireland, finance minister Brian Lenihan and Taoiseach Brian Cowen and officials and regulators.

"The intent was to stabilise the system," he said.

People could take "an academic position" but it would have been a "brave call" to have let Anglo go under because at the time it sourced a large slice of its deposits from Britain. "There were a lot of technical issues about the guarantee. What it would be. A lot of talk about Tier 1 and a lot of phone calls to head office," he told friends. The bank guarantee agreed that evening "was very similar to other guarantees of other countries" that needed anyway to be approved by the European Commission.

He is expected to tell the banking inquiry that AIB's biggest mistake was relying on assumptions for a so-called soft landing that allowed for commercial properties to drop 25% and on regulatory stress testing of loan-to-value lending of 75% that should have been enough in normal conditions to save the banks. On the banking inquiry, he said: "The country has to move on and if that helps then all the good." But he said bluntly that the scale of banking crisis here was homemade and was not due to mainly international events. "It was Irish made – no doubt about that," he said.

He told sources that his biggest mistake was failing to rein in commercial property lending.

"I came back [from America] in 2005 and it was already half-time in the game.

"The whole country was on steroids. The competition in banking was intense. Development land was the problem.

"Could I have stopped it? I ask myself that all the time. Sometimes I think I could. But there was a huge momentum behind everything in the country," he said.

Sheehy (55) claimed that the crisis for Irish banks started as early as May 2007, much earlier than many commentators realised.

"There were dark clouds even then. It was like catching falling knives every day," he said, as cheap funding for the banks started to evaporate. "The fundamental thing is that we think we acted honourably all along," he told friends.

Acknowledging that as AIB chief executive there was "no hiding place" as the crisis unfolded, he is said to have no complaints about media coverage of his role in the crisis.

Referring to his loyalty to the bank, he told friends that he faced a severe challenge leaving the bank after 38 years.

Sheehy said that he met two of the four external candidates, including Liam McGee, who at the time worked for Bank of America in California, and another Australian candidate who had been headhunted as his successor.

He is said to believe that they did not pursue the AIB job because they had much better offers.

The minister for finance Brian Lenihan and the Green Party initially opposed appointing an insider but the AIB board late last year named insider Colm Doherty as chief.

Sheehy told friends that the Dublin banking industry was unaware that Anglo Irish had made loans of over €100m to Anglo chairman Sean FitzPatrick.

He said: "People still do not know about it."

Sheehy is said to believe that though economic recovery will come, this year will still be "tough".

The details of his severance package, which have not been disclosed, will be revealed in AIB's annual accounts when they are published in the next few weeks.