IFSRA chief Liam O'Reilly is determined to give his office the power it needs to be effective, writes Dominic Coyle.

Nine months ago, the new single financial regulator was established in the glare of the television spotlights. Since then, there has been an almost unsettling silence. Could this be another case of a Government promise fulfilled in word only before attention moves elsewhere?

This week, the Irish Financial Services Regulatory Authority (IFSRA) showed it was anything but political window-dressing, setting down a detailed strategic plan with specific priorities and target times for implementation.

IFSRA has placed its consumer role at the top of the list, setting out proposals to help consumers make informed choices through education, monitoring competition and ensuring service providers act in a fair and transparent way. Notably, it is targeting the insurance industry and the implementation of the Motor Insurance Advisory Board report.

It will also work this year to develop a new regulatory structure for the credit union movement, which outsiders and members concede is in need of reform.

Significantly, IFSRA has also placed the creation of a regulatory structure that "fosters safe and sound financial institutions while operating in a competitive and expanding market of high reputation" as a core objective.

The emphasis on the prudential approach is a throwback to the tug-of-war that saw the Minister for Finance, Mr McCreevy, and the Central Bank - neither of which had a vaunted reputation with the consumer - winning out over the Tánaiste who sought a regulator independent of the existing apparatus.

However, IFSRA chief executive Liam O'Reilly, himself a Central Bank insider, sees no contradiction between its responsibilities to consumers and the well-being and integrity of the industry.

He has even pushed the appointment within IFSRA of a prudential director who will attend all board meetings, even though this role is not part of the Act creating the new regulator.

Mr O'Reilly is also well aware of the need to be seen to be independent of the Central Bank and cites building the organisation as the final area of immediate concern. Among other things, this entails relocating IFSRA staff from several sites, including the Central Bank, to a new building by the end of April.

He is also pushing strongly for the passage of a Bill that will finally give his office teeth. Published recently and due to go before the Oireachtas in the first half of this year, it will provide for an ombudsman to whom consumers can complain, for the promised industry and consumer consultative panels to discuss policy issues and, most importantly, for the enforcement powers that will give it real authority in the financial services industry.

Not that he minds the hiatus since the regulator was created.

"In a sense, it is no bad thing that we have been given time and space to set down the ground rules and get them bedded into the institutions. If things had moved too quickly, they could justifiably have complained that we were asking them to do this and not giving them time to set systems in place and penalising them on top of it."

Protection of the consumer is at the heart of what Mr O'Reilly is trying to achieve and IFSRA's intention is to ensure this by demanding competence and integrity at management and boardroom level in companies of all sizes.

He accepts that, with companies ranging from multinational groups to small brokerages and from high-street banks to local credit unions coming under his ambit, a one-size-fits-all approach is not appropriate but argues that this does not negate the need for certain uniform principles to regulation.

"What we are trying to do is set down the standards that are expected and what that will do is create a competitive environment or a level playing field across the system," he says.

For those who stray, a new system of enforcement is crucial. "The second leg of the whole process is that we have to have sanctions but it is no use having just the nuclear sanction like we did in the past, where we close companies down.

"What we need to do is have a system of fines and systems of public sanction and censure so that, if institutions get it wrong, they put their hands up, pay the fine, it is seen they did it and it's bad publicity for them."

However, he is keen not to repeat the experience of other regulators who have repeatedly seen decisions dragged through the courts and is creating an appeals system with which Mr O'Reilly hopes the industry will co-operate.

"It is important the industry sees that the long-term interests of the consumer are aligned with their interests," he says.

"The problem I think with the financial services sector in general - it is as a result that you have the Enrons of this world - is the focus on the share price and the focus on short-term profits has, to a large extent, blinded institutions to the fact that they have to be there in the long run.

"That's why we don't believe that it is inimical to the firms that they have to look after their consumers. In any other business the consumer base would be king and I think there is a recognition of that in the financial services industry that we need to work on."

While consumer protection, the credit unions and insurance all figure prominently in the plans for 2004, Mr O'Reilly is determined that other areas, including high-street banks, will not slip beneath the radar. IFSRA is working on two separate surveys that will highlight costs in different parts of the banking system - credit cards and personal lending. These are due to be published early in the year.

As with last year's review of insurance costs, the authority anticipates that the surveys will trigger renewed interest among consumers about securing value for money in these services.

The director of consumer affairs, Ms Mary O'Dea, will also be producing two consumer guides early this year, one on mortgages and one on savings and investments. These are the first in a planned series of consumer guides.

The difficulty in switching between financial service providers is another issue highlighted in research carried out by IFSRA.

Mr O'Reilly says he will not be unhelpful to Mr McCreevy, who introduced a stamp duty on bank and credit cards that only further discourages switching, and will implement whatever legislation is in place. However, he acknowledges "that if you want to drive people into electronic and efficient means of payment, you should be gearing your tax structure in that direction".

By the time IFSRA produces its first annual report in the middle of 2004, it also hopes to have reached a conclusion about how it will be funded.

Mr O'Reilly is conscious of the need for balance between regulation that is seen to be effective and regulation that might damage the competitiveness of companies operating in the Irish market.

"The flip side is that we do not want to become an area that has a reputation of an offshore centre that has no regulation. We would argue that to have an industry that is well regulated is important for that industry's reputation but we must also be able to demonstrate that we are providing value for money in that area."

While it was initially understood that IFSRA would be fully funded by industry, there is now an acceptance that certain functions may fall outside the responsibility of industry, including the cost of developing legislation and educating consumers.

"Because we have not worked out exactly how much should be charged due to the public good element, because of the fact that there are set-up costs and because we are going through these best practice reviews over the next few years, it was felt it would be better to phase in charging and that's why, in the first year, we are only going to be charging industry €20 million. How much this job is going to cost in the long run is really something we don't know yet," says Mr O'Reilly.

With an authority that has responsibility for the banks, insurance companies, brokers, credit unions, investment firms, moneylenders and bureaux de change, Mr O'Reilly insists that a co-ordinated unified approach is vital to IFSRA's success.

However, that does not mean it will shun new financial areas, such as spread-betting, which come on the scene.

"We want to ensure that we do not follow kitchen sink syndrome where we are drawn and pulled in different directions and take our eye off the ball. However, there is no doubt that if something like spread-betting starts to move markets - and there is a danger that it could - we have to take it seriously."

Concluding with a clear warning on the importance of probity in financial services, he welcomes the increased co-operation between IFSRA and the Revenue Commissioners allowed under recent legislation.

"What we want is for Revenue to tell us when someone in senior management or at board level has colluded with a customer or has evaded tax themselves," he says. "If that is the case, we then have a clear indication that they should leave the business. We don't want tax evaders in the financial services industry."

Factfile

Name: Liam O'Reilly

Age: 55

Position: Chief executive of the Irish Financial Services Regulatory Authority

Family: Married to Alice with one son and one daughter

Interests: Walking and catching up with family over golf

Why he is in the news: IFSRA has published its first strategic plan this week, outlining the priorities and targets for the new financial regulator