Sean FitzPatrick was arrested at his County Wicklow home
The former chairman of Anglo Irish Bank is being questioned by Irish police about alleged financial irregularities.
Sean FitzPatrick stepped down in December 2008 after admitting he had concealed millions of euros in personal loans from the Dublin-based bank.
He hid the loans from shareholders by temporarily transferring them to another bank before each year-end to avoid revealing them in the accounts.
The bank became a symbol for the decline of the "Celtic Tiger" economy.
Last year, Anglo reported the biggest loss in Irish corporate history when it made a loss of 4.1bn euros (£3.7bn) in the six months to March on the back of large impairments on its property loans to developers.
Its latest set of results, due to be published soon, are expected to be much worse.
The bank was one of the stars of Irish business during the country's property boom, lending billions of euros for development in Ireland and the UK.
It was nationalised by the Dublin government in 2009 after it threatened to collapse in the face of a property crash.
Aside from the concealment of directors' loans, other scandals to afflict the bank included a scheme to allegedly give artificial support to the bank's share price and the recording of a huge loan from another bank as a customer deposit.
Last week Mr FitzPatrick told the bank he could not repay 70m euros (£63m) he owes in unpaid loans.
As a result, the bank has started legal action against him in an attempt to recover the debt.
Mr FitzPatrick was arrested at his home in Greystones, County Wicklow, by the Garda Bureau of Fraud Investigation on Thursday. His house was also searched.
Following the arrest, Finance Minister Brian Lenihan said he had "always stated there is an extensive Garda investigation under way".
"I have been cautious not to prejudice that investigation and am eager to see justice take its course."