Advisory group to propose end of Bank regulation of financial services

A new institution to regulate the financial sector is to be recommended by the Government advisory committee set up last October. The committee, which will finalise its report over the coming weeks, was divided over whether to recommend the division of the Central Bank into two agencies, one of which would act as the new regulator, or to opt for the establishment of a new institution.

Following protracted discussion, the option of recommending a new institution was chosen by a majority of the committee. It is understood committee members from the Central Bank and the Department of Finance opposed the decision.

The committee's report, when finalised, will be forwarded to the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney, and the Minister for Finance, Mr McCreevy.

A decision will then be taken at Cabinet level.

The Central Bank and the Department of Finance may lobby against acceptance of the group's recommendation.

The governor of the Central Bank, Mr Maurice O'Connell, has said the separation of the functions of supervision and responsibility for the stability of the banking system is not something to be taken lightly.

A new institution, if established, could have up to 200 staff. At present more than 100 staff in the Central Bank are engaged in regulating the financial sector. A further 50 or so in the Department of Enterprise, Trade and Employment are involved in the regulation of the insurance market.

Staff are also likely to be moved to a new institution from the Registrar of Friendly Societies and the Office of the Director of Consumer Affairs.

The parent department for the new institution would be the Department of Finance and it would be envisaged that there would be some link between the regulator and the Central Bank.

MSF, the union representing staff at the Central Bank, is against the creation of a new institution and is in favour of the creation of a subsidiary of the Bank, which would have consumer representation.

Members of the Association of Higher Civil and Public Servants from the Department of Enterprise, Trade and Employment, are in favour of a "greenfield" structure being created.

In a motion to the association's a.g.m. today, the members have called on the Government to "take account of the particular sensitivities within the financial services sector market as regards remuneration". The creation of a new institution may create scope for increasing remuneration for the staff, many of whom may have skills which are much in demand in the private sector.

The advisory committee is chaired by barrister Mr Michael McDowell. Its other members are: Mr Joe Moran, the former chairman of the ESB; Mr Maurice Tempany, former president of the Institute of Chartered Accountants; Ms Carmel Foley, the Director of Consumer Affairs; and representatives from the Department of Finance, the Department of Enterprise, Trade and Employment, the Department of the Taoiseach and the Attorney General's office.