Banks, building societies and insurance companies are expected to be asked to pay all or part of the estimated €15 million it will cost to regulate the financial services sector this year under new legislation due to be published tomorrow.

The Minister for Finance, Mr McCreevy, is due to publish the Central bank and Financial Services Authority of Ireland Bill 2002, the legal framework that will determine the operation of the new single financial regulator. This will leave an interim structure in place before the Government's term of office ends.

The Minister will also announce the appointment of a board of directors that will oversee the implementation of the new structure. A number of these appointments still remained to be confirmed at the weekend although a chairperson was understood to have agreed to accept that position.

The publication of the Bill follows a lengthy and complex debate that aimed to create a one-stop-shop for the financial sector and its customers. The new structure will create a regulatory authority under the auspices of the Central Bank.

The Central Bank will now be reformed with the Irish Monetary Authority carrying out the functions conducted by the Central Bank on behalf of the European Central Bank.

There will also be an Irish Financial Services Regulatory Authority that will look after prudential and regulatory matters.

The issue of funding this new structure will be outlined in the Bill. This is expected to shift the cost of regulation from the taxpayer to the financial institutions which are being supervised. In 2002 industry sources estimate the Central Bank of Ireland will spend up to €15 million carrying out its supervisory functions within that sector which primarily focus on ensuring the solvency of these institutions and protecting customer funds.

Ireland is one of the few states which bears the total cost of regulating the financial sector. Most other states either recoup all or part of the total regulation costs from the sector through a levy determined by the Government.

There have been concerns that financial institutions would ultimately pass this cost onto their customers and this is something that will have to be addressed. The degree of independence of any regulator funded by the industry it is supervising, is also something the new board will have to overcome if it is to win the confidence of the consumers it is protecting.

A report on a new regulatory structure by the Attorney General, Mr Michael McDowell, made reference to the need for a review of the funding structure.

The need for a new regulatory authority was sparked by a series of regulatory failures and business collapses, which began with the investment broker, Mr Tony Taylor, who absconded with client funds.

The Tánaiste, Ms Harney, who commissioned the McDowell report, had originally favoured a new body to be set up completely independent of the Central Bank but this met great resistance from the Department of Finance.