* Landmark trial targeting bank at heart of Irish crisis
* Two senior executives given community service, not jail
* Judge: Regulator led bankers 'into error and illegality' (Adds judge criticising financial regulator, background)
By Sarah O'Connor
DUBLIN, April 29 (Reuters) - Two former senior executives at the bank at the heart of Ireland's 2008 financial collapse avoided a jail term on Tuesday when a judge ruled they were "led into error and illegality" by the country's financial regulator.
The two were sentenced to perform community service. No senior Irish banker has to date been jailed since the banking crisis forced Dublin to seek an international bailout.
Willie McAteer, the former finance director at defunct lender Anglo Irish Bank, and its former head of Irish lending, Pat Whelan, were convicted earlier in April on charges of illegal lending and providing unlawful assistance to investors, each charge carrying a maximum sentence of five years.
But Judge Martin Nolan at Dublin's Circuit Criminal Court said they did not deserve to go to prison as the office of the financial regulator had effectively given them the green light on the scheme by not taking action.
"It would be most unjust to jail these two men when I feel that the Financial Regulator, a state agency, had led the two men into error and illegality," he said before sentencing them to community service.
"Explicit warnings should have been given both by the state agency and the solicitors involved; they were not given."
The trial was seen as a landmark in Ireland, where Anglo Irish became synonymous with the casino-style lending practices that drove the "Celtic Tiger" boom and subsequent bust, pushing the state to the brink of meltdown in 2010.
Former Anglo Irish chairman Sean FitzPatrick was found not guilty of the same charges earlier this month in the first such case since the crisis.
The trio were accused of providing loans to a group of 10 people dubbed the "Maple Ten" and to the wife and five children of businessman Sean Quinn in 2008 to enable them to buy shares in the bank, boosting its stock price.
McAteer and Whelan were judged guilty on 10 counts of illegal loans to the "Maple Ten", but were acquitted on six other charges of illegal loans to Quinn's family.
The three former executives had also been accused of providing loans of about 625 million euros to bank clients to enable them to buy shares in Anglo, unwinding a derivatives position in the bank held by Quinn.
The loans were used by customers including Quinn's wife and five adult children to buy shares in the bank. The Quinns were unwinding a stake of as much as 29 percent in Anglo Irish built up via contracts for difference (CFDs), which do not have to be publicly declared.
The bank's management had feared a disorderly unwinding of the CFD position would put the lender in jeopardy. Quinn's family then bought a 15 percent stake and the Maple Ten clients took a 10 percent stake.
The judge said that in his view, Ireland's financial regulator - which has been overhauled in recent years after failing to keep a lid on wild lending during the boom years - had been aware of substantial parts of the scheme.
"I find it incredible that the red lights didn't go off in the regulators Office and that appropriate advice wasn't sought," Nolan told the court. "I think the regulator felt the overarching purpose was to save the bank and save the financial system."
Reporting by Sarah O'Connor; Writing by Conor Humphries; Editing by Mark Heinrich