ANALYSIS/REGULATION: Sufficient time should be allowed for finance houses to examine the Bill, writes  William Johnston

The much-awaited Central Bank and Financial Services Authority of Ireland Bill is exciting in the extent of its scope.

The manner in which the regulatory authority and the Central Bank will interact will be particularly interesting.

Part of the success of the Central Bank has been attributed to its independence from Government. However, the Bill provides that the Minister may request the governor or the board "to consult" with the Minister concerning the performance of any function of the Central Bank.

The governor or the board is required to "comply with a request" made - this request, though, is a request to consult, not a request to discharge a function.

The Central Bank will be required to "support the general economic policies of the European Union", although this is not to affect the objective of maintaining price stability.

Thus the Central Bank's view of price stability or what may affect it remains paramount and, in that sense, the Central Bank maintains its independence.

The new regulatory authority, which is to be "a constituent part of the Bank", will perform many of the functions previously performed by the Central Bank.

One of the more exciting aspects of the legislation is that the regulatory authority is required to take whatever action it considers appropriate "to increase awareness among members of the public of available financial services and the costs, risks and benefits associated with the provision of those services".

Although the regulatory authority is a constituent part of the Bank, it has clearly been given its own mind in that, where performance of a function by the Bank is dependent on its opinion, belief or state of mind, and the function is, to be performed by the regulatory authority, the regulatory authority is required to perform the function on the basis of its own opinion, belief or state of mind.

Furthermore, any act done in the name of the Bank by the regulatory authority in the performance of the authority's functions is taken to be done by the Bank.

These provisions are likely to give rise to interesting discussions between the Central Bank and the regulatory authority.

The satisfactory performance of the Central Bank to date is in part due to the licensing and supervision requirements and standards for credit institutions as set out and implemented by the Central Bank.

These requirements and standards are not to be found in any legislation and the ultimate success of the new structure will depend upon further guidelines, requirements and codes, which are awaited with interest.

One surprising feature of the Bill is the scissors and paste job that has been done to the Central Bank Act of 1942.

This Act has been heavily repealed already by the Central Bank Acts of 1971, 1989 and 1997.

While the approach does not affect the clear language of the Bill, it does make the reading of its provisions and the interaction with other legislative provisions cumbersome.

Financial services providers now operate in a compliance culture environment; further resources will need to be designated by them in a detailed review of, and ultimately compliance with, the legislation, which runs to 220 pages.

The extent to which statutory provisions are to be amended by the Bill is very considerable.

Although the Bill was expected much sooner, there should be no complaint as to its perceived delay - it has clearly been a mammoth task to draft.

Sufficient time should be given to financial services providers to review and consider its proposals and make any submissions.

William Johnston is head of the banking and financial services group in Arthur Cox.