Mr Drumm, 51, former CEO of Anglo Irish Bank, accepts that multi-million euro transactions took place between Anglo and ILP in 2008, but disputes they were fraudulent or dishonest.
Mr Gantly agreed with Brendan Grehan SC, defending, that the heads of treasury from six major Irish banks were invited to the Central Bank for a meeting on 6 November 2008.
It was suggested to them that they issue bonds and then buy the debt from each other, with a view to improving confidence, Mr Grehan said.
Mr Gantly said that this showed just how bad things were in Irish banking at the time.
"The Central Bank wanted as many safety nets as possible," he said.
He told Mr Grehan that this type of activity between banks was not unusual, but said the support that came from banks to each other "on the bonds" was much higher.
"And this was the Central Bank and the Financial Regulator telling you to issue bonds?" Mr Grehan asked. "Yes," Mr Gantly replied.
"And would this have been disclosed to the market?" Mr Grehan continued. "No. Absolutely not," the witness replied.
Mr Drumm, of Skerries, Dublin, has pleaded not guilty to conspiring with former bank officials Denis Casey, William McAteer, John Bowe and others to defraud depositors and investors at Anglo Irish Bank by "dishonestly" creating the impression that deposits in 2008 were €7.2 billion larger than they were.
The bank's former CEO has also pleaded not guilty to false accounting on December 3, 2008, by furnishing information to the market that Anglo's 2008 deposits were €7.2bn larger than they were.
The trial, is now in its eleventh week, and continues before Judge Karen O'Connor and a jury of ten men and four women.
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