COMMENT: Clear and focused objectives for the new regulatory authority will go some way to easing chief executive Liam O'Reilly's job, writes Jonathan Westrup.

Who would be a financial regulator? Enron, Equitable Life, slumping stock markets and pension debacles have ensured that names like Harvey Pitt and Howard Davies have moved from the business page to the front page. And look what happened to Harvey Pitt.

Liam O'Reilly, the recently appointed chief executive of the Irish Financial Services Regulatory Authority (IFSRA), must have few illusions about the nature of the task he faces. If the overall climate is not challenging enough, his appointment as a former central banker, and that of Mary O'Dea as consumer director, has rekindled accusations that the IFSRA's credentials as a protector of consumer interests will be subsumed under the Central Bank's traditional role of prudential regulation.

These accusations may prove unfounded but the Government's decision to set up the IFSRA as part of the Bank, rather than as an independent entity as recommended by the McDowell report, makes such suspicions inevitable.

The Government has, in effect, dismissed the McDowell report's concern that, under the terms of the Maastricht treaty, the Bank's governor is "effectively irremovable" and therefore a unitary structure "does not afford the degree of accountability recommended by the Group".

To overcome these concerns, the Government has proposed a convoluted reporting structure for the IFSRA, with its own direct line to the Minister for Finance and to the Oireachtas. But at first glance, the new institution still resembles a central bank with a regulator tacked on.

As a consequence of the proposed structure and his own provenance, Mr O'Reilly's challenge in reassuring the public that the IFSRA is not just a continuation of the ancien regime is formidable.

There are measures the Government can take to make the authority's life easier. The first is to ensure it is given clear and focused objectives. My research* found that a lack of such objectives for Irish regulators was a key factor to explaining the confusion about their roles and responsibilities. It has also led to great difficulty in determining whether the regulators have performed satisfactorily.

In this regard, the Government has proposed a particularly important and welcome objective for the IFSRA: raising public financial awareness.

This proposal follows similar objectives for financial regulators in the UK and Australia, where they have a statutory responsibility to ensure the ordinary citizen is helped in understanding the arcane nature of personal finance.

In a world where governments and companies are increasingly opting out of responsibility for pension provision, raising financial awareness is critical to equipping people to manage their own financial futures. Raising financial awareness should, therefore, be a key aim of the IFSRA and should be resourced accordingly.

The second measure is setting up consumer and practitioner panels to advise the IFSRA. As a former stockbroker, I know how articulate and forceful an organisation such as the Financial Services Industry Association can be.

Consumers, however, have had no comparable bodies to represent their interests. This lack of consumer presence was a constant theme in the OECD's report on Ireland's regulatory reform in 2001 and the Taoiseach has committed the Government to rectifying the situation. To be effective, the consumer panel must be given sufficient resources to allow it carry out its own research agenda.

But setting up such panels is not included in the current legislation but is promised in a further Bill to be published later this year. Given their importance, the Government should appoint the panels on a non-statutory basis so they can participate fully in the establishment of the new regulator.

A final point is not a matter for the Government but for the Oireachtas. For the regulatory structure to work effectively, the relevant Oireachtas committee must ensure it maintains a consistent overview of the IFSRA.

Too often in the past, the governor of the Central Bank was called before the Committee on Finance and the Public Service after a financial "scandal" but was then not asked to appear again until the next controversy occurred. The committee must ensure it reviews the IFSRA's performance regularly and that it has the technical resources to carry out the task.

Former attorney general David Byrne asked in 1998: "Who regulates the regulators?" If the Oireachtas is not willing to carry out a consistent oversight function, it can have little cause for complaint when, as they will, regulatory controversies arise.

The IFSRA has a difficult and demanding role. By definition, financial regulation can never prevent all mishaps - caveat emptor should always be a guiding principle.

But once it can reassure the public that it is indeed a new regulator with clear objectives, subject to the review of a strong, articulate consumer panel, and regular, informed scrutiny from the Oireachtas, Mr O'Reilly and his team can prove themselves to be financial regulators of a high calibre.

*Financial Regulation: the Accountability Dimension. The Policy Institute. TCD, Dublin.

Jonathan Westrup is a former stockbroker and is studying for a PhD in political science at Boston University.