The governor of the Central Bank, Mr Maurice O'Connell, is to remain in office for almost an extra year.

Mr O'Connell, who was due to retire on April 30th, will now stay in his post until the end of February 2002, following a Cabinet decision yesterday.

A spokeswoman for the Minister for Finance, Mr McCreevy, said the Government was keen for Mr O'Connell to oversee the changeover to the euro.

"The governor has agreed to stay in office so that he can oversee the final stages of the changeover to the euro," she said.

The changeover, scheduled for January 1st, 2002, is one of the biggest tasks facing all European central banks. Old notes and coins will have to be taken out of circulation and new euro notes introduced.

Extending Mr O'Connell's period of tenure allows the new director general of the Central Bank, Mr Liam Barron, time to settle into the job before a new governor is appointed.

Mr Barron stepped into the post - the second most senior at the Bank - following the retirement of Mr Padraig McGowan last year.

His promotion opens up a number of other promotions further down the line and keeping Mr O'Connell in place should establish some stability.

The Department of Finance has written to the European Central Bank seeking its consent to the extension of Mr O'Connell's governorship. The move will require amending legislation in the EU Treaty which deals with central bank rules. It may mean that the current impasse on the new single regulator will not be decided within the next year.

The Tanaiste Ms Harney and Mr McCreevy are at odds over the issue. Ms Harney favours the appointment of a new greenfield regulator in line with a recommendation from a committee chaired by the Attorney General, Mr Michael McDowell. Such a move would significantly dilute the role of the Central Bank and is opposed by the Department of Finance. Mr McCreevy would prefer to see the Bank retaining its existing responsibilities in relation to the regulation of the financial sector.

The president of the ECB Mr Wim Duisenberg has also expressed a preference for the retention by central banks of the role of prudential supervision of financial institutions. There is some discussion that this function may eventually be operated centrally as the pace of crossborder mergers and acquisitions increases.

Sources say it's now unlikely that the Cabinet could approve any whittling away of the Central Bank's power, having asked Mr O'Connell to delay his retirement for a year.

The fact that the post of Central Bank governor will not become vacant until next year is likely to be a disappointment to some economists and senior Department of Finance personnel who could have been in line for the post. There has been a good deal of speculation about Mr O'Connell's successor although no clear favourite had emerged.