Consumers should have to pay for the cost of regulating the financial services sector, according to three professional associations representing brokers.
The Irish Brokers' Association (IBA), the Professional Insurance Brokers' Association (PIBA) and the Independent Mortgage Advisers' Federation (IMAF) have made a three-way submission to the Irish Financial Services Regulatory Authority (IFSRA), objecting to key elements of its proposed €20 million annual levy on the industry.
Mr Paul Lynch, IBA chief executive, said the IFSRA was a service to consumers and that, in normal situations, it was the end-user of the service who paid for it.
The brokers suggest that a levy on all insurance products could be charged to cover the IFSRA's costs. This would add 58 cents to the price of a policy worth €1,000, according to Mr Lynch.
Alternatively, the existing 2 per cent levy on general insurance policies, which currently goes straight into the Exchequer, could be used to fund IFSRA, according to the brokers.
As a third option, the brokers argue that Central Bank profits could be used to meet regulatory costs.
The IFSRA has proposed that major credit institutions such as banks and building societies would pay 30 per cent, or €5.9 million, of the total charge in the first year. Insurance firms would pay 23 per cent (€4.6 million) and securities and investment firms would contribute 14 per cent (€2.8 million) of the total charge in 2004.
Insurance and mortgage intermediaries say the combined 10 per cent levy on brokers - or €2 million for the first year - far exceeds their proportion of revenue in the financial services sector.
"It is way in excess and totally unacceptable," said Mr Diarmuid Kelly, chief executive of PIBA.
The brokers are suggesting a levy of €1 million, which would represent 5 per cent of the total levy on industry.
The associations are concerned that the IFSRA's proposal to apply the levy to intermediaries using a "flat-fee" system would mean that small independent brokers would pay the same rate as larger brokers.
They are also objecting to the double charging of intermediaries who act as both insurance and mortgage brokers.
The deadline for responses to the IFSRA's consultation paper on funding passed yesterday. Submissions will be posted on the regulator's website. However, the brokers are seeking a second round of consultation, saying that the initial paper "raised more questions than it answered".
The IFSRA proposes that a funding levy be introduced on a phased basis. The €20 million set for 2004 covers just over half of its estimated €39 million regulatory and start-up costs for the year. The brokers' groups want the industry levy to be fixed at €20 million for three years.
In its response to the IFSRA's consultation paper, Financial Services Ireland, the industry body representing companies at the International Financial Services Centre, has called on the regulator's €39 million budget to be capped until 2008.
Its director, Ms Aileen O'Donoghue, said there needed to be much greater transparency in relation to costs if the funding regime was to be credible. "IFSRA must deliver value for money," she said. "Industry will now have higher expectations regarding the service and expertise of the financial regulator now that it is paying 50 per cent of the cost of the structure."
