The former chairman of Anglo Irish Bank says the bank and the Cowen government should have realised the extent of the problems facing the lender before the guarantee.

The comments from Alan Dukes come after Central Bank Governor, Patrick Honohan, told the banking inquiry yesterday that Anglo should have been shut down, instead of covering it by the blanket guarantee.

He also told the Inquiry that guaranteeing all bank bondholders was a mistake.

The inquiry will also examine the role of a Domestic Standing Group, which was put in place by the government at the time.

Mr Honohan also said that former finance minister Brian Lenihan wanted to take Anglo Irish Bank into public ownership before the bank guarantee was introduced.

However, he was overruled by others who refused to nationalise the bank, with a view to shutting it down, according to Mr Honohan.

Mr Dukes says the Northern Rock crisis and the problems facing German banks at the time should have alerted policy makers to the scale of the issues facing Anglo.

He told Newstalk Breakfast that a different course of action could have been taken.