The Minister for Justice, Mr McDowell, has launched a research paper questioning the accountability of the new financial services regulator being created by the Government.
The Minister, who chaired the Government-appointed group which considered the establishment of a single regulatory authority, rejected suggestions that his decision to be associated with the highly critical report would undermine the fledgling regulator. "I have an enormous level of confidence in the process of regulation. People are entitled to express their point of view."
The study, Financial Services Regulation in Ireland - the Accountability Dimension, was written by former stockbroker, Mr Jonathan Westrup, for Trinity College's Policy Institute.
He asserts that the Government has made a mistake in rejecting the McDowell Report's recommendation to establish a new and stand-alone regulator in favour of a structure which is chaired by the governor of the Central Bank, who cannot be removed from his position.
"A single independent regulator was the way to go," Mr Westrup said.
The IFSRA is "not an ideal structure. It has a lot of interesting points. The objective of raising the awareness of consumers and the establishment of consumer and practitioner panels are to be welcomed".
The author argues that the political system's experience with regulators has not been wholly satisfactory and warns that the cost of regulatory mistakes in financial services could be very high.
"The Oireachtas committee system struggles to carry out its oversight function of regulatory agencies and significant reform is required if it is to succeed in this role in the case of the IFSRA."
Mr McDowell said that, regardless of the structure which eventually emerged, the fundamental issue is accountability. "If you purport to licence and regulate a sector, you must be accountable for your stewardship. Paper accountability to an under-resourced and under-experienced Dáil committee is not real accountability."
The Minister said a Dáil committee charged with enforcing the accountability of a financial services regulator needed assistance.
Some options that could be considered include a value for money external audit of the regulator, or an in-house Dáil advisory service, which could be funded by the financial services industry.
Mr Westrup suggests that the weakness of the committee system is that it lacks access to expert advice and research.
Mr McDowell suggested that the study would provide a useful handbook for those who are involved in this "challenging project".
