The two reports into the causes of the banking crisis published earlier this month blamed politicians, regulators and bank executives for the near-meltdown of the financial system. The one institution that has so far escaped scrutiny is the Department of Finance.

That is about to change. Brian Lenihan's announcement last week that his department is going to be subject to an independent external review of its crisis management and "the systems, structures and processes used by the Department of Finance in providing advice to the minister and the government" means that some light may now shine on the actions of officials and advisers whose work otherwise remains invisible.

Central Bank governor Patrick Honohan said in his report that, from the middle of 2008 onwards, officials in Merrion Street took on a greater role in resolving the banking crisis than might have been expected. The former chief executive of the National Treasury Management Agency, Michael Somers, put it more bluntly on RTE two weeks ago when he told Marian Finucane that the department had become "all-powerful" and "pervasive" and should face an inquiry over its responses and role in the crisis.

Defenders of the department say it was impossible for it to predict the scale of the banking and economic catastrophes that hit Ireland in such a short time and that it hardly helped that Lenihan was reading himself into the job as the crisis unfolded in the summer of 2008. Added to the mix was the attitude of the banks, which weren't prepared to accept the full scale of their problems, and the fact that the Financial Regulator and Central Bank didn't challenge them more aggressively. That left Lenihan and his officials without a complete picture when they took the major decisions on the deposit guarantee in September 2008 and on the recapitalisation of AIB and Bank of Ireland six months later.

"Nobody would expect there to be in-house expertise. It should have been coming from Dame Street, but the department felt they couldn't rely on the Central Bank," said one market source who has frequent contact with the department and its senior officials. "They completely underestimated the scale of non-regulation and were really taken aback by what the regulator didn't have [in terms of data]. By the time December 2008 came around the department bought into an assessment that the problem in the big two banks was less than it actually was."

One former minister who has had extensive involvement with the department for over 20 years said he believed officials were "very slow" to respond to the banking and fiscal crises.

"I think they were overwhelmed by what was happening. They had too many issues to deal with and that is because the department has taken responsibility for too many functions," the former minister said, welcoming the decision to give the NTMA control of the government's dealings with the banks. The ex-minister also pointed out that, while the government was the first in Europe to bring in a guarantee, it took months to accept that capital levels needed to be addressed and that, almost two years into the crisis, it was still debating with AIB about how they should be raised.

"You'd have to be critical about some of the things they've done," the person said.

Others point to a skills shortage on Merrion Street, with few of the staff having direct experience of working in the sectors for which they are meant to be responsible. That gap has been exacerbated in the crisis. The former minister pointed out that, even during the boom years, the department repeatedly failed to get its tax forecasts correct, and while that was just about acceptable when money was flowing in, accurate forecasting was essential now.

"The actual level of resources within the Department of Finance, the actual numbers of qualified people, whether economists, accountants or financial analysts, I get the impression there are very few of those people," Labour party finance spokeswoman Joan Burton said. "There are a lot of generalists who've done a lot of work on preparing legislation. Given that modern finance is very complex, I think it's extraordinarily foolish the way the senior civil service has allowed the Department of Finance to drift without a sufficient cohort of qualified people in a variety of disciplines who are capable of seriously analysing what's happening in modern finance and the economy. The other issue for the public service is, how do you get a mixture of people who've both worked in the public service for life but also people who've worked externally and who come in for a period of time."

Those who take a benign view of the department's response argue that its reactions were always going to be insufficient given the scale of the crisis being faced by the country.

"The Department of Finance was overwhelmed by the coincidence of the economic crisis, the banking crisis and the public finances crisis. All three are interrelated but they put different strains on the system. In those circumstances, it is like a guy in a trench with bombs falling in all directions. How do you get out of it? But you see the same issues in the treasury in the UK and in the States and they have vastly greater manpower and vastly greater academic credentials," said one former department official who now works for a financial institution.

A market source said external factors have played their part in hindering the department's response to the banking situation. The source said some of the advice it received from external consultants was poor and the department shouldn't have let the European Union drive the Nama process, with the consequence that it was delayed getting off the ground.

What is required, say some sources, is not recruiting from the private sector directly to the top of the department, but bringing people into middle management so they can adapt to the civil service structure before being appointed to higher positions.

According to another economist, the department should consider setting up a permanent group of "wise men" to advise the minister of the day on policy, a role similar to the US president's council of economic advisers.

"I think history will be kinder towards the department and the government because we are in a very angry stage, and that is understandable. They got a lot of things wrong but there is no academic treatise that says you do this in the following order and you get the solutions you want," said an economist who has worked in the department.

Who Runs Banking Policy?

In the civil service hierarchy, the secretary-general of the Department of Finance ranks as the second most important after the secretary-general to the Department of the Taoiseach. Until the appointment of Patrick Honohan it was also a certainty that the job would lead to the office of governor of the Central Bank.

The current secretary-general is Kevin Cardiff, a career civil servant who was appointed in January and has worked in the department since 1987 in various roles, including as head of the powerful Financial Services Division during the banking crisis. He is said to be very close to finance minister Brian Lenihan.

Cardiff was succeeded in his old job by William Beausang, another department veteran. Beausang has been very involved in the major decisions Lenihan has made since September 2008. He worked closely on getting EU approval for the government's restructuring plans for the banks and on the preparation of Nama.

Lenihan's main economic adviser is Alan Ahearne, a former economist for the Federal Reserve in Washington and a lecturer at NUI Galway. Described by those who know him as one of the sharpest economists of his generation, Ahearne became Lenihan's special adviser in March 2009. He has been very prominent in the government's push to win over or rebut anti-Nama commentators, many of whom are academic colleagues.