The Irish Bankers' Federation (IBF) has expressed the industry's concerns about the proposed establishment of a single regulatory authority, stating the Government's objectives could be achieved by restructuring the Central Bank.

In its position paper, the industry body for Irish and international banks operating in the Republic states that, while it is not seeking to promote any particular solution on the regulation of the sector, it believes some restructuring of the Central Bank could prove a more timely and effective way to achieve these objectives.

The IBF stressed yesterday that its members would work constructively with whatever regulatory regime was adopted but those members harbour deep concerns about the proposed new arrangements. "The Central Bank has a good reputation. Overseas investors will rightly ask: `If the existing regulatory bodies are doing nothing wrong, why is the system being changed'," the IBF said yesterday.

The McDowell report on regulation of financial services, which recommends that the Central Bank lose its regulatory and supervisory role, was criticised by the Bank for failing to draw attention to the "potential downsides" of a move to a new greenfield regulator. The Central Bank warned last week that removing its regulatory role could put the Republic's international reputation and that of the IFSC at risk.

The report was based on a Government decision of October 1998 to establish a single regulatory authority. The IBF position paper recognises the need for the new structures proposed but warns that the benefits to be gained from an independent authority are overstated while the risks associated with a move away from the Central Bank are understated.

The IBF is unhappy the report of the implementation group for the single authority failed to detail any of the risks it considered before framing its recommendation. In the absence of this information, the IBF contends it is impossible to know whether the degree of risk considered is realistic or not.

As the legal framework is already in place for the setting up of subsidiary companies within the Central Bank, any changes could be achieved within a reasonable time frame. "The Central Bank is already responsible for the major portion of the financial services sector and has the necessary reputation, expertise and experience to undertake the role," according to the IBF.

The federation represents 50 institutions, including banks based at Dublin's International Financial Services Centre.