THE MAZARS report into the effectiveness of the Financial Regulator – commissioned by the regulator itself – hit the nail on the head when it highlighted the shortcomings of the banking watchdog.

Compared with regulators internationally, the Irish regulator had a disproportionately greater focus on protecting consumers than on ensuring high levels of prudential supervision of the banking sector.

This is not really a surprise given that the regulator grew out of the controversy at National Irish Bank in the late 1990s surrounding customer overcharging.

The regulator was very much established on a stronger consumer protection footing six years ago and this was a failing of the Government. Proper prudential supervision seems to have fallen through cracks between the regulator and the Central Bank.

A case in point is the banks’ increasing and heavy reliance on the international money markets, not deposits, over recent years. This grew rapidly without hindrance by the regulator or the Central Bank, fuelling the credit boom and the property bubble. Even though the Mazars report was finalised last February, key findings have only emerged publicly over the past fortnight. This is because the regulator and the Government refused to release it.

The regulator now says that it had “fundamentally changed the way we regulate, to take a more intensive and hands-on approach to the institutions benefiting from the State guarantee” and that it was reassigning staff to critical areas in the prudential directorate.

Given the financial meltdown, the Mazars report should have been released publicly as soon as it was finalised. Lessons must be learned and learned under the public’s gaze if trust is to be restored in the banks and how they are regulated.