Legislation to bring subprime lenders under the consumer protection code could be enacted before the end of this year, according to the Irish Financial Services Regulatory Authority.

"We believe that the protections which are in place for consumers who deal with banks and other authorised firms should apply to all retail lenders; in particular we believe the suitability requirement is a crucial element in the sales process," Patrick Neary, chief executive of the financial regulator, told the annual conference of the Irish Banking Federation yesterday.

"We have been working with the Department of Finance on draft proposals to ensure the necessary legislation is enacted as soon as possible and this is likely before year-end," Mr Neary told delegates.

He said he would like to see arrangements that are already in place to manage arrears in the regulated sector apply to the non-regulated sector and added that the regulator would have discussions with subprime lenders about protection for their existing customers.

The subprime market in Ireland is estimated at €2 billion.

"Our domestic credit institutions here do not have the significant exposures to the subprime market as it would appear others may have elsewhere. This, of course, does not mean that we are insulated from these global issues. The situation remains volatile and, until things settle down, we all have to remain alert," he said. The regulator has widened and deepened its monitoring of the institutions it supervises, he said.

Mr Neary said that German regulators had looked at so-called conduits or off-balance sheet investment vehicles of German institutions operating in Ireland in 2004 but added that was normal procedure. "We have no sense there was any fundamental issue or major concern at that time in relation to the way that business was being carried on," he said.

A number of lessons from the recent credit crunch will have to be addressed, he said. These include the role played by ratings agencies and the growing use of predictive models in the market, as well as why liquidity had not flowed to where it was needed most despite the unprecedented release of liquidity.