The Government will commit itself this week to establishing a new independent regulator for the financial sector, but it appears likely that the body will be linked to the board of the Central Bank. This will be presented as a way of establishing a new watchdog for consumer interests, while still retaining the skills of the Central Bank in managing the financial system.
The revised Government programme, due to be published this week, will say that the two parties have agreed to establish an independent regulator for the financial sector. It is not expected to go into further detail about how this body will operate, with proposals due to be presented to Cabinet by the Tanaiste, Ms Harney, and the Minister for Finance, Mr McCreevy, before the end of the year.
However, it is understood that the new regulator is likely to be an institution with its own staff and chief executive. Its primary mandate will be consumer protection. To ensure policy is carried out consistently between it and the Central Bank, the new institution will have a relationship with the board of the Central Bank. However, its operations will be separate and it will have considerable independence from the Central Bank.
Under the expected compromise, the Central Bank is expected to retain its role in overseeing the overall health of the financial sector and for most aspects of prudential supervision. It also has a statutory role as lender of last resort to the financial sector.
The Government appointed a committee, chaired by Mr Michael McDowell - now Attorney General - which recommended that a greenfield regulator take complete control of financial regulation. However, the Central Bank has strongly lobbied to retain its responsibilities for prudential supervision and has won support from much of the financial sector.
The Tanaiste, however, has led calls for an independent regulator, particularly to safeguard the interests of consumers. Together with the Minister for Finance, she is now expected to present proposals to the Cabinet on the issue later this month or in December.
