THE FINANCIAL services industry has called on the Financial Regulator to introduce a specific unit dedicated to monitoring developments in international financial markets.

In its annual report for 2007, the Financial Services Consultative Industry Panel, which represents the financial services industry in Ireland, said that in light of developments such as the global credit crunch, the Financial Regulator should establish a strategic policy unit, "to maximise insight and understanding of global market developments in framing appropriate regulatory policy responses".

When the global credit crunch hit last summer, the Financial Regulator was castigated for its approach to the crisis and its regulation of firms affected, such as Sachsen LB.

"The Financial Regulator is now over five years old, and given the extraordinary growth and global entanglement of financial markets and instruments, the panel feels that the Financial Regulator needs a resource working with senior management to monitor these developments. This is particularly relevant in today's uncertain climate," said James Deeny, panel chair, who envisions that the unit would consist of four to five people.

In its report, the panel also criticised the 11 per cent increase in the Financial Regulator's budget for 2008.

Staffing costs are the Financial Regulator's most significant expenditure item at €29.9 million, with new hire costs accounting for a sizeable increase in the budget. As such, instead of hiring new people, the panel would "like to see efforts to redeploy people from areas which may be less busy or mission critical".

The panel also expressed concern over the IT and HR services provided to the Financial Regulator by the Central Bank, and believe the senior management of the Financial Regulator should have more direct management and control over its IT and HR functions.

During the year, the panel commissioned KPMG Consultants to carry out a review of unnecessary regulatory requirements capable of being amended by the regulator, which will feed into the review and consolidation of financial legislation currently being carried out by the Financial Legislation Advisory Forum. The review is continuing.

The panel operates on a voluntary basis, and members are not paid to participate in panel work.

In 2007, the cost of the panel was €64,640, down from €108,000 the previous year. The panel is due to be reconstituted in October 2008.